Super fund advice urged around $8.5b aged care deposit flows
Australia’s largest superannuation lobby group has pointed to the need for financial advice around residential aged care and the limits imposed on superannuation funds in meeting those needs.
At the same time, the Association of Superannuation Funds of Australia (ASFA) has pointed out that there is currently about $8.5 billion a year in inheritances flowing from the repayment of Residential Accommodation Deposits (RADs) from aged care homes to estates – am amount far in excess of death benefits.
“The aggregate amount of RADs contributing to inheritances each year is nearly three times the annual amount attributable to superannuation balances of retirees still held at the time of death,” ASFA told the Government’s Aged Care Taskforce.
ASFA’s reference to the amounts flowing from RADs into estates comes against the background of the Government having strongly argued that superannuation should not be used as an estate planning mechanism.
On the question of financial advice, ASFA said recent research had revealed there was an expectation that financial advisers should be able to provide advice about all aspects of retirement, including private funding requirements for aged care.
“Many individuals contemplating entry into residential aged care, together with their families, are faced by difficult financial decisions. While greater flexibility is now available in regard to the balance between accommodation deposits and ongoing charges, this does make for greater complexity and the need to consider alternative options,” it said.
“There is also interplay between the holding of various financial assets and the means tests for both the Age Pension and aged care ongoing costs. Some individuals also will have taxation and estate planning issues that they need to address.”
“All of this highlights the need for any changes to aged care financing to support effective decision making by individuals. This might in some cases require the provision of financial and other advice and guidance to the individuals concerned,” the ASFA submission said.
“How such advice and guidance is provided is important for its quality and cost. Arguably there is a need for more financial planners to receive training in regard to aged care personal funding requirements and options that are open to individuals.”
“There are regulatory requirements that constrain the ability of superannuation funds to provide financial advice in regard to matters that are not superannuation related, including the funding of such advice out of an individual’s superannuation account or the funds of a superannuation fund more generally,” it said.
“However, individuals who have retired are able to withdraw amounts and to use such amounts for expenses.”
“Some funds provide educational material about aged care on their websites and/or provide details to their members about external financial advisers with expertise in the area of aged care arrangements.”
It’s so simple Industry Super, just charge each individual for the Advice.
Yet again Industry Super wanting to expand Intra Fund Advice.
ISA want unqualified, uneducated back packers in call centres paid via HIDDEN COMMISSIONS charged to all members to pay for very detailed individual advice needs.
Remember all the ISA adverts about the evils of Adviser commissions.
ISA now promotes such evil COMMISSIONS but worse still they are HIDDEN from most members who pay these HIDDEN COMMISIONS FOR NO SERVICE.
It’s time super funds STOPPED their flagrant self-interest and considered the best interest of clients.
It’s also time everyone realised residential aged care is expensive if you have assets. Oh, and let’s not forget it’s also a Centrelink and estate planning minefield, so providing aged care advice is not for the feint hearted!
In many instances, to keep the cost of care affordable PPRs and super holdings have to be sacrificed to allow for payment of a Refundable Accommodation Deposit (RAD), sometimes the only way ensure the cost of aged care can be maintained without destroying family wealth.
In part, due to the cost of “interest charges” that apply when a RAD is not fully paid, keeping PPRs and super and are frequently not the best option for protecting family wealth. Another thing to consider is, when the RAD is repaid to the Estate, there’s no hidden “inheritance tax”, which is in direct contrast to distributions from super where there are non-SIS dependant beneficiaries.
There is nothing stopping any super fund from employing a qualified adviser and providing advice that is charged for personally in a compliant manner — except for the fact they don’t want to do so. There are however legislative provisions stopping an unqualified call centre operator from providing advice that is paid for by other fund members without taking into account the person’s full situation, thankfully.
As someone who gives advice in the aged care space semi regularly I really fail to see how an in-house adviser at a super fund could possibly give advice that is consistently in the client’s best interest. First there is the complete lack of diverse investment/product options to meet complex strategies and then of course the conflict of interest in retaining FUM when it could be better used to fund a RAD or alternative strategy.
There is definitely a need for better access to aged care advice (and advice generally), but the answer lies in reducing unnecessary red tape for independent advisers, not a return to vertical integration at the hands of product providers.