Funding the needs of Australia’s ageing population
13 September 2021
On 28th June 2021, the Australian Federal Government’s Treasury department released the latest Intergenerational Report (IGR). The IGR is an annual report that is designed to show what Australia could look like in 40 years if the current policy settings remain the same, to assist with strategic decision making and spending.
The ageing population
The report findings show that there will be a long-lasting effect of COVID-19 on the economy due to constrained population growth. One outcome is that our ageing population will likely be larger (as a proportion of population) than what was expected, with 23 per cent of the population projected to be over 65 by 2060-61 (7 percentage point increase from 2020-21) which will continue to put greater stress on welfare and health services.
The trend of people living longer is also expected to continue to increase as the ‘baby boomer’ generation continues to age:
- Men born in 2060-61 are expected to live to 86.8 years old on average, compared to 81.4 years for people born in 2020-21.
- Women born in 2060-61 are expected to live to 89.3 years, compared to 85.4 for those born in 2020-21.
What does this mean?
An ageing population will mean increases in demand for health and aged care services, which means spending in these sectors is also predicted to increase over the next 40 years. Aged care spending is projected to nearly double as a share of the economy by 2060-61.
Dementia prevalence is also expected to continue to rise as a result of Australia’s ageing population over the next 40 years. It is expected to overtake heart disease to become the leading cause of death in coming years. Increasing rates of dementia will have a significant impact on Australia’s health and aged care systems and present one of Australia’s most pressing health challenges.
How will this be funded?
Funding health and age care services is a complex matter. Funding plans include:
- The 2021-2022 Federal Government Budget included a $17.7b allocation over a 5-year term to reform the aged care system, which includes $6.5b for an additional 80,000 Home Care Packages to support people who choose to receive care at home take pressure off aged care facilities as they reach capacity.
- Compulsory superannuation is scheduled to increase from 9.5% to 12% by 1 July 2025. The Federal Government is encouraging people to drawdown on these funds rather than just accessing the returns solely.
However, many commentators note that the combination of Federal Government support, and superannuation will not be enough to fund Australia’s population as we continue to age. The Australian Government’s Treasury Department recently released an updated Retirement Income Review. The review recognised that there is a significant portion of wealth tied up in people’s homes, and is therefore also encouraging the use of equity release products as a solution to funding retirement and aged care needs, in addition to the use of superannuation. Accessing home equity, such as with a Heartland Reverse Mortgage, can be one of the solutions.
Using a Heartland Reverse Mortgage for aged care needs
It might seem like the only way to fund residential aged care is to sell the family home, but this can be distressing for families at an already stressful time. In many cases, the home could be retained by using a reverse mortgage to fund aged care costs without having to make regular repayments until the end of the loan.
Heartland’s Aged Care Option is designed to assist with paying aged care facility fees such as the Refundable Accommodation Deposit (an upfront lump sum payment that is refunded to you when you leave the aged care home), the Daily Accommodation Payment (The daily accommodation charge that is non-refundable), or other ongoing costs. You can find out more about aged care fees here.
Live at home for as long as you choose
According to a research report released on financing ageing in place by RMIT (the Royal Melbourne Institute of Technology), which was supported by Heartland, 90% of Australians aged 60 and over want to remain in their homes for as long as possible.
If you wish to enjoy the freedom and independence of ageing on your own home, Heartland’s Standard Reverse Mortgage could also be used to pay for home care, home improvements, and medical expenses – to help you own and live in your home for as long as you choose.
Can we help you?
Heartland has a dedicated team of reverse mortgage specialists who deliver personalised service. If you would like to apply for a reverse mortgage, arrange a face-to-face meeting with an accredited broker, or have any questions, please feel free to get in touch.
Ageing population information sourced from the Australian Government’s Treasury Department, 2021 Intergenerational Report: https://treasury.gov.au/sites/default/files/2021-06/p2021_182464.pdf
Information provided is accurate as of 13 September 2021, and may change from time to time.