RETIREMENT village operator Lendlease is set to introduce new contracts across some of its villages.
In a move that is set to shake up the industry, Lendlease will offer a choice of four payment alternatives at 15 of its 71 retirement villages, including options with no exit fees, with plans to extend them across the board.
The news comes hot on the heels of retirement living developer Stockland's move to introduce it's "no exit fee" concept.And last year, under pressure from regulators and facing a NSW government inquiry, Aveo launched its simplified Aveo Way contract.
Together with Lendlease, these three biggest operators of retirement villages have traditionally stuck to a model where the resident pays less up front but shells out a deferred management fee when they move out.
Lendlease is still offering its existing traditional deferred management fee contract, where a person buys a unit and then pays a deferred management fee at the end, along with three new options:
- Pre-paid plan. The resident pays the management fee upfront (about 18 per cent) and retains full capital gain or loss on the property. Exit fees would be around 1-2 per cent in sales commission and $10,000-$15,000 in refurbishment costs.
- Refundable contribution. Residents do not pay a management fee, instead paying a higher contribution on entry that is refunded when you leave. There is also a non-refundable 3 per cent establishment fee is payable upfront.
- Pay As You Go. Residents pay a monthly contribution rather than a lump sum management fee.
Lendlease Retirement chief executive Tony Randello denied the move was a knee-jerk reaction to the recent backlash against retirement village contracts.
He said baby boomers wanted more choice and the pilot scheme was a direct response to this, offering more transparency and flexibility.
Mr Randello said the new financial options were being designed and tested "long before" others in the industry announced changes to their contracts.
"We have done a lot of research asking existing and future customers, as well as 'rejecters' who have said no to retirement living, about what's important to them," he said.
"For some people it's the lifestyle - they don't like the idea of living with other like-minded people of around the same age. For others, they're not sure about the financial offering. And for baby boomers, choice is very important."
Mr Randello said while he believes the traditional deferred management fee model will remain the most popular contract, the move was about opening up options to future customers.
He said Lendlease is testing the four alternatives with a view to tweaking the packages along the way if required.
Aged Care Gurus principal Rachel Lane, who was paid for some of the research used by Lendlease, said she had been pushing for a long time for operators to offer options without a deferred management fee.
"What they're doing is not brand, shiny new, because a number of community and church-run providers already offer different options," she told Fairfax.
"The reason it is going to shake up the market is that Lendlease has got 70-odd retirement villages."
Ms Lane likened the payment alternatives to the options available when buying a mobile phone or a luxury car.
"Feedback suggested that for some people a capital gain was important; others wanted certainty they'd get back what they'd paid, and a third group desired the ability to pay month by month," she said.
