A SYDNEY academic has launched an online calculator to help people compare the long-term costs of different retirement villages.
Tim Kyng, a senior lecturer in actuarial studies at Macquarie University, was prompted to develop the calculator after experiencing problems with retirement village contracts when his mother was looking at moving into one.
"As a researcher who specialises in financial products, I didn't expect that the contracts on offer would tax my ability to analyse them. They did," Dr Kyng said.
"What I found was a great variation in the entry fees, ongoing fees and so-called 'deferred management fees' across the retirement village industry. The entry fee is substantial, usually comparable with the cost of buying an apartment.
"It is difficult and time consuming to get the details of how the contracts work and even more difficult to compare one with the other.
"In fact, some operators in NSW demand a $1000 deposit for the privilege of looking at a contract. They will give you the money back if you decide not to proceed but it really inhibits comparison shopping."
The free calculator takes the complex range of fees (entry fee, ongoing fee, exit fee and information about the sharing of profits or losses on the resale of the apartment) and calculates a simple equivalent monthly rent for the years of residence.
It also estimates the length of time someone is likely to live in the village, based on their age and gender at entry.
"It's important that consumers are able to compare the cost of retirement housing, as well as the facilities and social environment," Dr Kyng said.
"To help comparison shopping, consumers should be able to get key cost information in clear language when they are first looking around. Some retirement villages are withholding key cost information or only giving it in complex documents."
Dr Kyng gives an example of two retirement villages in Sydney with entry fees of $775,000 (village A) and $750,000 (village B). Village A also has higher monthly fees, $850 compared to $450 for village B. However, village B has an exit fee of up to 35 per cent but no share of capital gain/loss whereas village A has no exit fee and a share of capital gain/loss.
When the calculation is done it can be seen that the equivalent monthly rent over seven years for village A is $1800 but for village B is more than double at $3900.
"Most retirement village contracts are very complex arrangements," Dr Kyng said.
"Many consumers think it is like buying your own apartment. It usually isn't, and you don't own it. Residents only have the right to live there until they become too sick, voluntarily relocate or die."
Dr Kyng recommends people thinking of entering a retirement village shop around and not settle for the first one they find; to negotiate with the operator and not just accept the deal offered; and to be aware of all the terms of the contract.
NSW Fair Trading recommends anyone thinking of moving into a retirement village should carefully read and consider all the information and seek independent, expert advice before signing any contracts.
