Aged care: Nursing home bond or daily accommodation charges?THIS is one of the most asked and most difficult question: Do we pay by posting a nursing home bond or do we pay daily accommodation fees?
This is where a financial adviser comes in handy. Quite often nursing homes have an association with one or more financial advisers, so they can refer you on. While you obviously need to be careful in accepting financial advice given this association, the financial adviser is likely to know a lot more than you do.
It is really about asking the financial adviser the right questions to find out about the cheapest way of paying accommodation charges.
Technically, whether you post a bond or make a daily payment makes no difference, but personal circumstances may mean that paying a bond or a daily accommodation fee are very different.
This is how it works.
Bond or daily?
A nursing home sets a bond for a place. If you pay that bond, the nursing home will invest the money and generate a return. This return pays for the place.
But the nursing home must also calculate a daily charge which equals the investment return. This calculation uses a rate of return set by the Department of Health and Aged Care. This rate is currently 8.15 per cent a year.
In other words, if a nursing home expects to generate a rate of return higher than 8.15 per cent, it may be keen on being paid a bond. If it expects a lower return, it may be keen on daily payments.
This doesn’t concern you, though. You need to work out your preference.
For example, let’s say the bond set is at $300,000. For argument’s sake, let’s say you’ve got that money sitting in the bank, in a term deposit, earning 5.5 per cent a year.
Will you pay a bond or will you use the interest from the term deposit to pay daily accommodation charges?
The interest from your term deposit is $16,500 a year. The daily accommodation charges add up to $24,450 a year. Will you be able to pay $24,450 out of $16,500? Silly question, so you post a bond.
But things can be more complicated.
What, to flog our example a bit harder, if you had $150,000 sitting in the bank at 5.5 per cent a year?
Obviously, you would still like an effective term deposit rate of 8.15 per cent over what you’re getting at the moment, which is 5.5 per cent.
So, you would probably go hybrid: pay half the accommodation charges by a bond of $150,000 and pay the rest ($24,450 divided by 2 equals $12,225 or $33.50 a day) through daily accommodation fees.
Now, this are two relatively easy sets of circumstances. Factoring your own personal real-life circumstances can make things a lot more complex.
That’s why getting a financial adviser to work through scenarios relevant to you is such a good idea.
Do you get a government subsidy?
Accommodation charges are means-tested. If the resident doesn’t have any income other than the pension and no significant savings, chances are that the government will pay their accommodation charges.
If the resident does have extra income and/or savings or assets, it’s likely that they may have to pay some or all of the applicable accommodation charges. Nursing homes can largely set their own accommodation charges.
The home which a resident has vacated to move into a nursing will not be exempt from means-testing, unless somebody lives there who has lived in the home for at least two years before the move and (1) has cared for the resident and (2) is on a social security payment. More conditions apply.
Even so, the home regardless of its market value will only be included to a maximum of (currently) $197,735.20.
If you have income below $32,331and assets below $58,500, the Australian Government will pay your accommodation costs.
If you have income above $81,063.32 or assets above $197,735.20, you will need to pay for the full cost of your accommodation, negotiated and agreed to with the aged care home.
Where to get more information
In between these income and asset levels, you generally pay some but not all accommodation charges.
The MyAgedCare website offers an aged care fee calculator.
The phone number for the section in Centrelink that deals with aged care means-testing is: 1800 227 475.
Also read:
Aged care: when being a protected person means you can be evicted
THIS is one of the most asked and most difficult question: Do we pay by posting a nursing home bond or do we pay daily accommodation fees?
This is where a financial adviser comes in handy. Quite often nursing homes have an association with one or more financial advisers, so they can refer you on. While you obviously need to be careful in accepting financial advice given this association, the financial adviser is likely to know a lot more than you do.
It is really about asking the financial adviser the right questions to find out about the cheapest way of paying accommodation charges.
Technically, whether you post a bond or make a daily payment makes no difference, but personal circumstances may mean that paying a bond or a daily accommodation fee are very different.
This is how it works.
Bond or daily?
A nursing home sets a bond for a place. If you pay that bond, the nursing home will invest the money and generate a return. This return pays for the place.
But the nursing home must also calculate a daily charge which equals the investment return. This calculation uses a rate of return set by the Department of Health and Aged Care. This rate is currently 8.15 per cent a year.
In other words, if a nursing home expects to generate a rate of return higher than 8.15 per cent, it may be keen on being paid a bond. If it expects a lower return, it may be keen on daily payments.
This doesn’t concern you, though. You need to work out your preference.
For example, let’s say the bond set is at $300,000. For argument’s sake, let’s say you’ve got that money sitting in the bank, in a term deposit, earning 5.5 per cent a year.
Will you pay a bond or will you use the interest from the term deposit to pay daily accommodation charges?
The interest from your term deposit is $16,500 a year. The daily accommodation charges add up to $24,450 a year. Will you be able to pay $24,450 out of $16,500? Silly question, so you post a bond.
But things can be more complicated.
What, to flog our example a bit harder, if you had $150,000 sitting in the bank at 5.5 per cent a year?
Obviously, you would still like an effective term deposit rate of 8.15 per cent over what you’re getting at the moment, which is 5.5 per cent.
So, you would probably go hybrid: pay half the accommodation charges by a bond of $150,000 and pay the rest ($24,450 divided by 2 equals $12,225 or $33.50 a day) through daily accommodation fees.
Now, this are two relatively easy sets of circumstances. Factoring your own personal real-life circumstances can make things a lot more complex.
That’s why getting a financial adviser to work through scenarios relevant to you is such a good idea.
Do you get a government subsidy?
Accommodation charges are means-tested. If the resident doesn’t have any income other than the pension and no significant savings, chances are that the government will pay their accommodation charges.
If the resident does have extra income and/or savings or assets, it’s likely that they may have to pay some or all of the applicable accommodation charges. Nursing homes can largely set their own accommodation charges.
The home which a resident has vacated to move into a nursing will not be exempt from means-testing, unless somebody lives there who has lived in the home for at least two years before the move and (1) has cared for the resident and (2) is on a social security payment. More conditions apply.
Even so, the home regardless of its market value will only be included to a maximum of (currently) $197,735.20.
If you have income below $32,331and assets below $58,500, the Australian Government will pay your accommodation costs.
If you have income above $81,063.32 or assets above $197,735.20, you will need to pay for the full cost of your accommodation, negotiated and agreed to with the aged care home.
Where to get more information
In between these income and asset levels, you generally pay some but not all accommodation charges.
The MyAgedCare website offers an aged care fee calculator.
The phone number for the section in Centrelink that deals with aged care means-testing is: 1800 227 475.
Also read:
Aged care: when being a protected person means you can be evicted
