Page 8 - Wealth-Adviser-Issue-122 (FWP)

ISSUE 122
OCTOBER 2025

The role of a financial adviser now extends well beyond basic product
selection. Advisers help clients compare funding options—such as the

balance between lump-sum Refundable Accommodation Deposits (RADs)
and daily accommodation payments (DAPs)—while also modelling the

impact on cash flow, Age Pension entitlement, and overall estate value.

cap—while clinical care costs remain fully government-fund- adviser’s input can clarify the knock-on effects on Age
ed. For daily living expenses, new “hoteling” contributions Pension, assets, and ongoing costs. Only by comparing both
will cover essentials such as food and cleaning, calculated immediate and future outcomes can families reach sound
based on income and assets. conclusions.
From financial planning guides to commission reports,
the message is consistent: strong protections are in place Financial Resilience: Protecting Assets and
to ensure affordability and fairness, but understanding the Adapting to New Rules
details is now more crucial than ever. As Yield Financial Protecting wealth throughout the aged care transition
Planning underscores, “Anticipate that greater complexity involves both practical strategies and philosophical consid-
will mean more Australians will benefit from financial erations. The new Aged Care Act continues to offer choices,
advice before moving into aged care.” with RADs remaining government guaranteed and exempt
from Centrelink asset tests, while changes to retention rates
Making Informed Choices: Role of Advice and and indexed interest payments under the daily payment
Customised Strategies model mean it is vital to re-examine planning assumptions.
Faced with these reforms, Australian families must nav- As one expert from First Financial notes, “In Australia,
igate an increasingly intricate landscape, where individual the average RAD payable is $470,000 but can be much
circumstances and choices can have lasting consequences. higher for in demand locations. The RAD has its advantages,
The clear consensus from advisory experts and professional being government guaranteed and Centrelink assets test
bodies is that comprehensive financial advice is invaluable exempt. For those entering aged care from 1 November
in weighing aged care options. 2025, the facility must retain 2% pa of the RAD, up to 10%
“Confusion, concern, and complexity are a common over five years.”
thread with aged care, so it is important to consider obtain- Crucially, new rules around means-testing, lifetime
ing professional, financial advice. Planning ahead, including contribution caps, and provider oversight add additional
both estate planning and aged care planning, can make a layers of complexity. Government reforms stipulate,
difference.” This sentiment is echoed throughout adviser “Residents with sufficient means, based on their assets and
reports, highlighting the importance of integrating aged care income, contribute until reaching a lifetime cap ($130,000
planning with broader retirement and wealth management in total contributions, or after four years, whichever comes
strategies. first). Clinical care costs in residential aged care will be fully
The role of a financial adviser now extends well beyond funded by the Government.”
basic product selection. Advisers help clients compare Advisers regularly stress the risk of focusing too nar-
funding options—such as the balance between lump-sum rowly on short-term cost differences, as broader impacts on
Refundable Accommodation Deposits (RADs) and daily pension entitlements, estate planning, and future family
accommodation payments (DAPs)—while also modelling the circumstances can outweigh initial savings. This is where
impact on cash flow, Age Pension entitlement, and overall philosophical insights become practical advice, encouraging
estate value. Aged Care Steps advises that “advisers must clients to think holistically and proactively.
be prepared for greater demographic changes, more robust
standards for advice, and in-depth strategies to respond to Conclusion: Preparing for Dignity, Certainty and
longevity risk and frailty.” Peace of Mind
Scenario modelling and long-term analysis are vital. For Aged care transitions present both challenges and oppor-
example, the case of Betty, facing decisions about paying a tunities for Australian families. The weight of lived expe-
lump-sum RAD versus daily fees, illustrates how a financial rience—regrets about acting too late, gratitude for forward

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