Australia’s rapidly ageing population has ensured that in recent times the challenges of retirement have never been far from the headlines. This week unfortunately the retirement living sector — and one operator in particular — has been making news for all the wrong reasons.
The investigation carried out by Four Corners and Fairfax raised some deeply troubling issues that deserve scrutiny. But it’s worth making the point that by and large, the retirement living industry in Australia is a consumer-driven business heavily regulated by State legislation.
It is this legislation that prescribes the models that can be applied by operators to generate revenue. In most cases, the model employed involves an exit fee that is paid on departure, commonly referred to as a Deferred Management Fee.
However, this is where the similarities across operators end. There are many opportunities for providers to structure different contracts including an array of approaches to exit fees, reinstatement costs, care services, payments schedules and capital gains. When residents leave retirement villages it is often their families that are left to unravel these agreements, despite often having had little if anything to do with them in the first place.
"In such a complex environment it is not surprising that some consumers feel taken advantage of."
- Darrell Price
Many of the biggest players in the retirement space are corporates and like any business, they exist to make a profit. However it is equally true that — like any business — their long-term success depends on their customers having positive experiences.
Numerous studies have found that across the Australian retirement sector sentiment is generally positive. A significant majority of residents enjoy an enhanced standard of living, longer life expectancy and a strong connection with their village community.
The 2013 McCrindle Baynes Census found that:
- the net promoter score for the Australian retirement village sector was +25, ahead of all 19 industries surveyed by Bain and Co (the next highest was 24 with an industry average of -15).
- 95% of residents participated in village activities and 93% said that overall happiness and life satisfaction had increased significantly or stayed neutral since moving into a village
- 87% of residents chose their village for a safe environment, emergency support and to maintain their independence
Additionally, a Property Council of Australia report on the retirement village sector, undertaken by Grant Thornton, found that the retirement sector delivered $1.987b in savings due to delayed entry into aged care and $177 million in savings because residents required fewer hospital and GP visits, were discharged earlier from hospital and experienced better mental health.
The vast majority of retirement operators take the wellbeing of their residents very seriously and have systems and processes in place to track resident satisfaction. In general, residents consistently report very high satisfaction scores.
Stocklands' 2016 Annual Review - Retirement living residents voice community and wellbeing
|Response (% satisfaction score)|
|Health and Wellbeing||Physical health||76%||78%||69%|
|Emotional wellbeing (health)||82%||91%||84%|
|Personal relationships / social life of the village||92%||92%||85%|
|Number of social activities to participate in||83%||84%||80%|
|Satisfaction with accessibility features||87%||88%||87%|
|Education||Satisfaction with the opportunity to try new things and learn||75%||77%||73%|
|Community Connection||Satisfied with sense of community||86%||87%||86%|
|Satisfied with opportunity to connect with others||88%||88%||85%|
Extract from Stocklands’ 2016 Annual Review, showing significant positive experiences by their residents
Both the Property Council of Australia and Leading Aged Services Australia, retirement living peak bodies, offer accreditation schemes, Lifemark and IRCAS respectively, for members. Both schemes focus on relationships with residents and how to optimise village life for the benefit of residents, their families and operators.
Retirement villages are playing — and will continue to play — a vital role in housing our ageing population. Where unscrupulous or unfair practices are discovered they should absolutely be stamped out quickly and completely.
It is unfortunate that this week’s media that has focused on a handful of cases has the potential to cast the entire sector in a negative light. Aveo is a major player and even a hint of impropriety will understandably be heavily scrutinised.
However, the vast majority of operators clearly understand that happy residents are the key to successful villages, and seek to balance the residents’ needs with corporate realities. We should take this week’s media revelations as an important warning about what issues can emerge in retirement living, but they are not an indication of broader problems in the Australian retirement sector.
Improvements are always possible and we should take on board any and all lessons that can be learnt from this week’s story. Because the reality is Australia needs a healthy retirement living sector now more than ever.