Booming Nursing Home Scandal – Not on Middle Head in Tony Abbott's electorate, surely! ABC's Alan Kohler has written a disturbing story with portents for Middle Head, Mosman.
See Alan Kohler’s story “Retirement village rorts: the booming scandal” published by ABC's 'The Drum' go to: http://www.abc.net.au/news/2014-07-10/kohler-retirement-village-rorts-the-booming-national-scandal/5584412
Extracts – 'Retirement village rorts: the booming scandal'
If the Government is looking for a way to redeem itself in the eyes of the nation's ripped-off retirees after the CBA financial planning fiasco and its pro-bank FoFA amendments, I have just the answer: the scandal that is retirement villages.
Tony Abbott and Mathias Cormann need to step in and clean up retirement accommodation, and what heroes they would be if they did it: their supine performance over the CBA and bank financial planning generally might even be forgotten.
The industry is a booming national disgrace, with three very juicy rackets: deferred fees, ongoing fees that keep going when you die, and bonds.Taking them one at a time, deferred fees are where you buy a unit in a retirement village at full price, but when the time comes to sell you have to pay the village owner a large percentage of what you get. One village that I'm familiar with requires 25 per cent of the original purchase price to be paid to the owner, plus 75 percent of any capital gain. Others simply take 30 percent of the sale price - 3 per cent a year for a maximum of 10 years.
And if the next stop is an aged care hostel, there is a bond to be paid – usually somewhere between $300,000 and $500,000. From the beginning of this month, bonds are also required for high-care nursing homes, although these are means tested.
The beauty of the bond racket is that there are no restrictions on what the hostel owner may do with the money, and when it is repaid not only is there no interest, it is minus a fee of a few thousand dollars. Aged care facilities therefore have a float of at least $15 million and often much more depending on the number of beds, which the owner can mostly spends as it sees fit. All it has to do is keep enough on hand to pay out the steady trickle of departees - usually about 10 per cent.
Apart from that, the cash can earn a tidy profit over and above the pensions that are collected each fortnight, or could also finance a lavish lifestyle - cars, yachts, houses, travel. There are no restrictions.The skimming of superannuation savings by unscrupulous financial planners and wealth managers is bad enough, but what's going on with what cash is left at retirement is, if anything, worse.
The Government should make a show of cracking down on it and unifying all the various state laws into a national scheme, in which there is no double dipping on fees and interest has to be paid when the bonds are returned.