It is now commonplace to talk about the impact of an ageing population. It's much less commonplace to work through what it will actually mean in practice.
Older people are worried about whether their superannuation will be protected, and who will meet their health costs. Younger people, if they stop to think about it, are worried about the growing tax burden from supporting an ageing population. Employers and their representatives are starting to wonder how their needs for skilled labour will be met 5, 10 and 20 years out.
Already on the daily agenda of many people is how to afford and provide services to support ageing in place. As societies we recognise that the best option for older people is to remain living in their own home as long as possible - and this is also the best way of keeping costs down. But look closely at what happens in practice; this is becoming more and more difficult to manage. Even when older people have a statutory entitlement to services to support ageing in place, it is often extremely difficult to access those, and to ensure that they are delivered in ways which are empathetic to the needs of older people. Also, many services, which can actually be quite critical, may not be readily available on a funded basis - home maintenance, and personal services such as home hairdressing are examples.
Governments are becoming very aware that this is an extremely difficult issue politically. An ageing population means that older voters are an increasing proportion of voters (disproportionately so as older people are much more likely to vote than younger people). What's more they have strong incentives to use their political power as a lever to seek increased funding for services. On the other hand, expect a strong and increasing resistance from younger taxpayers to demands that they carry the burden for additional funding of services for older people especially when long-term projections suggest they are much less likely to enjoy the same benefits themselves.
One partial solution, which a number of governments are now considering, is finding ways in which older people themselves can be co-funders of the cost of ageing in place services. Not all older people have readily available savings, but most own homes which are either debt free, or have very low debt.
Accessing equity to help fund ageing in place services is an obvious answer provided it is done in a way which is seen as a fair and equitable.
One possibility is the various home equity release options offered by the private sector. However MDL has found that there is growing resistance amongst older people to the use of these options for reasons of cost and risk.
An alternative is the use of local government's rating powers which in New Zealand and some other jurisdictions can combine a targeted rate or service charge, with postponement until sale of the property or death of the surviving owner, as a means of funding services (postponed rates or charges, and all related costs, are accrued until the final payment date). Preconditions for this kind of approach include strong involvement by older persons themselves in the design and governance of oversight mechanisms, and probably a close relationship with one or more finance sector institutions to facilitate means of payment.
MDL provides management services for the Rates Postponement Consortium, a group of councils which some six years ago began offering older ratepayers the opportunity of postponing their ordinary council rates (for more background see the rates postponement website). More recently the Consortium, working with the Energy Efficiency and Conservation Authority, has developed an innovative use of rating powers to enable older people, whose councils wish to facilitate this, to draw down the equity in their homes to meet the cost of ageing in place services.
This work is ongoing in both New Zealand and Australia. Learn more by contacting us.