A cheaper retirement option? What to know about serviced apartments

In many retirement villages, you will find two types of accommodation, one for people living independently (often called independent living units or apartments) and one for those living with support (typically called serviced apartments). The serviced apartments are often in the main building, close to dining areas, lounges and the social hub of the village.

Serviced apartments are often seen as a great hybrid between living in your own home and moving into aged care. You have the privacy of your own apartment, which has often been purpose-built for ageing in place, with support for those things you can’t or don’t want to do anymore.

Serviced apartments can be cheaper upfront, but may cost you more down the line.Credit: istock

If you are thinking about moving into a serviced apartment, there is plenty to think about. When it comes to what you are going to pay it is important to look at the whole transaction, not just what you pay upfront.

The upfront price can be very cheap compared to other accommodation options, with many priced below $252,000. While the upfront price is lower the ongoing fee tends to be higher than for independent living in the same village because it covers more services. It’s important to ask what the fee includes and what services you will need to pay for on a user-pays basis.

Last but certainly not least, you need to consider any exit fee and whether there is a guaranteed buyback if the apartment doesn’t sell within a set timeframe.

If you get an age pension, understanding how the move to a serviced apartment is going to impact your pension and other entitlements is important.

Most serviced apartments are offered on a leasehold or licence contract with the amount you pay used to determine if you are considered a homeowner and qualify for rent assistance. As a general rule, if you pay $252,000 or less for your apartment you are considered a non-homeowner, the value of your home is included in your assets, and you can claim rent assistance on the ongoing village fees.

A single person paying at least $431 per fortnight could claim almost half of that ($211 per fortnight) in rent assistance. If you pay more than $252,000 for your apartment you are classed as a homeowner, the value of your home is exempt, and you cannot claim rent assistance.

While it is often thought of as a rule that only applies if you move into an aged care home, the two-year pension asset test exemption on the family home can also apply if you are moving into a retirement village to access care.

Many people moving into a serviced apartment need help with cleaning, meals and transport to keep living independently. Access to care, now or in the future, is often a key driver of the move.

Care is likely to be through a combination of a home care package and private services throughout the village. Some of the important care questions to ask are: who does the call bell summon (it may be a carer or emergency services), what happens if I need more care (and what does it cost), and under what circumstances can I be asked to leave the village?

Serviced apartments can provide a great mix of freedom, security and support. Crunching the numbers on what it costs, the impact on your pension and how much you get back (and how soon) means you can avoid any nasty surprises.

Rachel Lane is the author of the bestselling book Aged Care. Who Cares? and Downsizing Made Simple with fellow finance expert Noel Whittaker. The new edition of Downsizing Made Simple is now available online.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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