BY NICK GRANGER
Living out our last days in a residential care home is a prospect that few of us would relish. In 2014 the Burstow Commission called such homes “islands of misery”. The finances of such places also tend to be iffy and administrators are forever being called in or staved off – one of Britain’s biggest providers, Four Seasons, is a case in point.
A different option comes in the form of retirement villages, common in the United States, New Zealand and Australia, but only recently surfacing here in the UK. In such villages you can buy or rent your own apartment but have access to dozens of basic support and care services as you require them. However, many older people – especially those who fear loneliness or have recently lost a partner – who move in to such villages find the experience so positive that their final years get transformed.
Unlike in a care home, retirement village residents usually purchase an apartment on the site, although in some schemes they can part-buy, or even rent, the property. Residents bring their own furniture, decorate as they wish, and are free to have friends and family come to stay. Most villages allow pets to come too. Residents can also pay for care and support services, which are on-site, as and when they need them – for example, podiatry. They can get help with everything from shopping, for example, to assistance with washing, cleaning or getting dressed. There’s a busy social scene in care villages too – activities include everything from line dancing to croquet, tai chi to abseiling. However, these services don’t come for free. The service charges can be significant and can be a drain on your pension that becomes unsustainable because while the care village developer may build the facilities, the resident then pays extra for all services used. This can rapidly drain your pension pot and may result in your Local Authority having to pick up the charges with their already overstretched budgets – something the developers don’t talk about when applying for Planning permission for these villages.
But, there is also what some people see as a fatal catch.
Apart from buying an apartment, and paying a regular service charge, residents are obliged to pay what is variously known in the industry as an exit or “event” fee. The biggest bill only arrives when you move out or die. And since it will often run into tens of thousands of pounds, it can come as a shock for the resident’s next of kin. This becomes due when a resident dies, or moves on to full-time medical care elsewhere, and the apartment gets sold.
Some label care villages as the “enjoy now, pay later” model. Others, who have looked at the stats, simply refer to the “Care Village Con”.
The increasingly maligned Care Village exit fee depends on how long a resident has lived in the village but is typically capped at 10% of the original purchase price. However, in some cases it can be as high as 30%, after just three years. With purchase prices of £200K to over £1.2million, these exit fees can be big numbers and furthermore, as evidenced by the “Elderly Accommodation Counsel” and reported by the BBC Money Box Programme, around half of new build retirement homes sold during a 10-year period were later re-sold at a loss with nearly half falling in value by more than 50% – unlike the normal property market.
The Law Commission is currently investigating this issue and has declared that such fees are causing “anger and distress”.
“Bereaved families inheriting a property may have no idea that a fee is due when they sell it, let alone how high the fee could be,” said Law Commissioner Stephen Lewis.
Some retirement villages say they provide sinking funds to maintain the buildings, while others say they are to cover the cost of selling the properties.
In any case, Age UK claims they don’t bear any relationship to the actual costs incurred by providers:
“It’s quite clear that that fee has been added on as profit – pure profit – as part of the business model they use,” says Joe Oldman, policy advisor to Age UK. “That’s what creates the confused picture here, because there are some exit fees which are very hard to justify.”
In addition, the seller remains liable for the ongoing Council Tax and any ground rent charges until the property is finally sold.
If you’re thinking of moving into a retirement village, read the small print like never before, and check out the annual service charge and exit fees and other services charges – they will be more than you think.