Volume 4 Edition 7 Newsletter
Online at Permalink: http://www.financialcareservices.com.au/newsletters/vol-4-ed-7/
FINANCIAL CARE SERVICES Independent aged care, lifestyle and financial advice for seniors
Volume 4 Edition 7– 30 July 2014
A new financial year and a new aged care fee system.
Increases in Age Pension means test Allowances
Effective 1 July 2014, the Commonwealth increased the amount of Income and Assets that Pensioners may have before the means tests bite.
An Age Pensioner couple may now have Income of $284 per fortnight, $7,384 per year before the Income Test impacts.
A couple may have $286,000 of Assets in addition to their home, before the Asset Test impacts. A couple who do not own a home can have $433,000 of Assets before the Asset Test impacts.
As from July 2014, a homeowner couple could have an annual Income of $67,300 and retain that last one dollar per fortnight each of Age Pension, the Pension Supplements and the Centrelink Pensioner Concession Card. But the Asset test would exclude a homeowner couple from the last dollar of Age Pension if their combined assets exceeded $1,055,000.
Read more about the Centrelink Age Pension means test and Income and Asset cut-off levels.
The Pensioner Concession Card provides some nice concessions on pharmacy and utility bills. Please do not squander your financial resources just to get the Pensioner Concession Card.
The Age Pension alone provides for a frugal standard of living. For a modest, but still constrained, standard of living you need some financial resources in addition to the Age Pension.
The changeover levels for deemed financial income increased slightly on 1 July 2014.
For a single person, the first $48,000 of financial assets is deemed to earn 2% per annum and any excess financial assets are deemed to earn 3.5% per annum.
For a couple, the first $79,600 of their combined financial assets is deemed to earn 2% per annum and any excess financial assets are deemed to earn 3.5% per annum. Remember that at Centrelink a ‘couple’ is any two adults who share domestic arrangements and present socially as a couple.
If you are hoping for some Age Pension, Financial Care Services offers “special short consultation” to compare your Asset and Income position with the Centrelink limits for Age Pensions. You must ask for the “special short consultation” when you book your appointment or email your request for advice. Contact Financial Care Services on 03 9080 0338 to book your appointment.
If you are looking forward to retirement then a standard consultation could help you review your position and plan for a period of less work and more active involvement in the community.
A new system of fees for both residential aged care and home care.
The new system of residential aged care fees only applies to new entrants to aged care facilities. Existing aged care residents who stay in their current placement could continue to pay fees and Accommodation Charges under the pre-July 2014 system.
The key features of the new aged care fee system
• Every resident pays the basic daily fee of 85% of the Age Pension for meals, cleaning, laundry and management services.
• Accommodation Prices that reflect the quality of the accommodation rather than the wealth of the new resident
• A single continuously reviewed Means Tested Amount for every resident as a basis for Care Fees and possibly some Accommodation subsidy
• Safety net provisions so that any resident who currently has less than $45,000 of assets and no more Income than a full Age Pensioner would not be charged for Accommodation or Care
• Care fees are set at the actual cost of the personal support and nursing care that the resident is receiving but subject to an individual maximum related to the resident’s current means Tested Amount.
• Caps on the total amount of Care Fees payable in a Care Year and over a lifetime (including Home Care Fees prior to entering residential care)
• The new Means Tested Amount includes an Income Component and an Asset Component.
• The Income Component is half of any Income including Commonwealth Income Support Payments in excess of what a full Age Pensioner could have.
• The Asset Component applies a sliding scale of percentages to the current Asset value. In addition to the “Assets” as for the Centrelink Age Pension, both the amount of Refundable Accommodation Deposit (new name for “Bond”) paid and the value of the former home count for the Asset Component calculation. A now vacant former home may be included at a maximum value of $154,179.20.
The new system of residential aged care fees is more complex and has the potential to be ‘fairer’ than the previous system.
The ‘old’ assumptions about selling or mortgaging the former home to fund a lump sum Accommodation payment no longer apply. But agreeing to a massive Accommodation Price could still lead to financing problems.
Families will benefit from independent financial advice before agreeing an Accommodation Room Price. But the aged care facilities could be encouraging families to sign the Resident Agreement that includes the Accommodation Price, immediately the Resident enters.
Navigating the new fee system is more challenging with more pitfalls for families.
• Over a lifetime the Care Fees are expected to be lower for younger entrants to residential care. But direct entrants requiring high levels of support and nursing care will be asked to pay the full cost of their accommodation if they have sufficient resources.
• Limiting the Care Fees to the actual cost of personal support and nursing care constrains the Care Fees imposed on residents with a partner still active in the workforce.
• The caps on Care Fees protects residents who have high care needs together with longevity within the aged care system.
• The continuous review of the Means Tested Amount changes the pattern of aged care fees particularly when the aged care resident is a member of a ‘couple at Centrelink’. Selling the former home to pay the Accommodation Price via a Refundable Accommodation Deposit can produce a surprising impact on the Means Tested Amount.
• One impact of the sliding scale applied to the Asset value and the prescribed maximum value of a vacant former home is that a ‘homeowner at Centrelink’ cannot qualify for any Accommodation Supplement unless the former home is occupied by a protected person or jointly owned with another aged care resident.
If the partner/protected person leaves the home then the now vacant former home is immediately included in the Asset Component calculation and any Accommodation Supplement would cease.
Families need independent financial advice before the Accommodation Price is agreed and the Resident Agreement is signed.
Financial Care Services is prepared for the new system of fees and charges. For advice regarding your particular circumstances, call Christine for an appointment. A consultation before placing a loved one into permanent care could clarify the costs and check that the place is affordable before permanent entry is confirmed.
Call Financial Care Services on 9808 0338 to book a consultation before you finalize an aged care placement.
Call Christine on 03 9808 0338 to book an appointment to discuss your aged care financing.
Financial Care Services Pty Ltd
Independent aged care, lifestyle and financial advice for seniors in Melbourne, Victoria, Australia
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299570 (check this at www.search.asic.gov.au/fsr/flb.html)
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252529 (check this at www.search.asic.gov.au/fsr/far.html)
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Disclaimer: The information contained in this newsletter is of a general nature only and does not constitute “financial advice”. You should obtain your own personal financial advice before investing any money or moving in to any retirement village, lifestyle community or aged care facility. Financial Care Services is licensed to provide financial advice to individual clients based on their personal situations.
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