How will the new Aged Care Act impact retirement planning for advisers?

On 1 July, the new Aged Care Act will take effect, introducing big key changes to Australia’s aged care system that independent financial adviser Nathan Fradley said will “create a lot more complexity for clients”, and even more for advisers who don’t often engage with the aged care space.

“I think the residential care changes is what I need to worry about if I’m giving out aged care advice. Like, if you are giving advice to clients entering residential care, there’s a whole lot going on there,” Fradley said on The ifa Show.

“But I think the home care changes are really, really interesting and a huge opportunity for advisers who are just giving retirement advice as they are intrinsically linked.”

Where there are currently four levels of home care funding packages available to clients through the government, the new structure will include eight levels, plus two circumstance-based levels, and split the funding of home care into three buckets – clinical care, independent support and everyday living expenses.

By doing this, Fradley explained that the new laws will better protect clients from “vulture-like” practices within service providers and ensure their funding is allocated to what they actually need.

“A lot of the time it was what services they have available, what people they have, what staffing they have, not what you actually necessarily needed or your client necessarily needed,” he said.

“Now the assessment tells you what or tells your client what they actually get access to, which makes it a little more personalised.”

Furthermore, Fradley explained that some service providers have been known to charge exorbitant administrative fees, up to 30 per cent on top of the actual cost for service; however, the new legislation will cap this at 10 per cent.

“That’s a pretty substantial shift in the way it’s working. Mechanically, sure, there’s lots of changes but the mentality around it has shifted much more, I suppose, in line with maybe more of an NDIS,” he added.

On top of this, the new system will see all clinical care being fully government funded to align with the Australian medical system, meaning it won't require contributions from the resident.

When it comes to working with older clients, Fradley said the new system will allow clients to continue living at home longer, which is also generally in line with the government’s goals for the future of retirement living.

“From an adviser’s perspective, when you’re working with a client, ideally, you want to keep your clients at home as long as possible while they’re safe and healthy, because we know they live longer and healthier and happier lives, right?” he said.

“So, in doing that, I think this system aligns better with the needs of a client instead of whatever the system had available, and therefore with greater levels of variability in the funding available, we can better provide for the client to stay home a little longer.”

While it would be simple to think these changes will make advisers’ lives easier, Fradley said, “I am remiss to ever say anything’s easier when it comes to matters of government funding, but what I will say is this is going to be hopefully more correct.”

To hear more from Nathan Fradley, tune in here.