Lendlease to shake up retirement industry
Retirement village operator Lendlease is preparing to shake up the industry with three new payment options for residents, in addition to the traditional “deferred management fee”.
It follows on from the unflattering light shone on the retirement industry’s complex financial contracts that prompted other operators, like Aveo, to simplify payment methods.
Stockland also introduced an alternative payment method for retirement village residents, but Lendlease has gone further by offering a prepaid plan, a refundable contribution option or a pay-as-you-go scheme.
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Tony Randello, managing director of retirement living, says the move will put Lendlease in a strong position to capture the baby-boomers market.
“Baby boomers want choice; they have different financial circumstances and while we’ve had a property boom, we also had superannuation introduced in the early 1990s,” Randello says.
It’s really targeted at those who can afford to buy (into a retirement village) but don’t want to sell their home
“People are retiring with more super than they had previously, they’re more investment savvy than they used to be and may even choose effectively to invest some of their money and pay less.”
He says the prepaid option gave residents the choice of paying full price for their retirement village accommodation, and then pocket the full sale price, including the capital gain, when they sold up and left.
“It’s really pitched at someone who has an investor psyche, who wants to come into a village and not necessarily end up with less than what they paid when they moved in,” Randello says.
The refundable contribution involves paying upfront the price of accommodation plus an additional 30%, and a 3% establishment fee.
“When they move out, whether it’s after six months or 15 years, we give them back the total amount within 60 days of them leaving,” Randello says.
“They’re designed for people who want something simple and want the sense of security of what they’re going to end up with when they move out, and there’s no deferred fee.”
It’s really pitched at someone who has an investor psyche, who wants to come into a village and not necessarily end up with less than what they paid when they moved in
Pay-as-you-go is essentially a rental scheme, where residents paid rent of about $600 a week on accommodation that would normally sell for $500,000.
“Pay-as-you-go means you can keep the family home and rent it out, and use that to fund your retirement living accommodation,” Randello says.
“It’s really targeted at those who can afford to buy (into a retirement village) but don’t want to sell their home.”
Despite the suite of new payment options, Randello says he expects the deferred management fee to remain the most popular. “There’s still very much a sense of having now, paying later, but we think having a choice of a prepaid plan, a refundable contribution or pay as you go, will have more market appeal,” he adds.
Residents of six Lendlease villages in NSW and Victoria have now been offered the new payment options, with another nine villages coming on board in Queensland, WA and the ACT in the next two months.
This article originally appeared on www.theaustralian.com.au/property.