The Rise In Popularity Of Retirement Villages

Introduction

Our financial planning process is designed to help our clients achieve their ideal lifestyle and for most this is focused on living their best life in retirement. This may include a period of transition away from work into retirement and then a period of ‘active’ retirement which may involve more travel and holidays abroad and doing all of the things on your bucket list before you get too old to enjoy them!

As clients reach their seventies and beyond so the active phase may give way to more rest and relaxation and spending more time with friends and family. However, most clients are keen to maintain their lifestyle as much as possible. When we discuss this phase of retirement with clients, they often mention that they would consider downsizing from their existing property and more and more clients have raised the possibility of moving into a retirement village.

What Are Retirement Villages?

Retirement villages are relatively new to the UK but are quite common in the US and Australia. In the US, retirement communities may be located in ‘sun-shine’ states such as Florida and centred around golf courses.

In the UK there are now more and more retirement villages being built and the demand for homes and apartments has increased dramatically over the last ten years or so.

A retirement village is not a care home or sheltered accommodation but is made up of a mixture of purpose built houses, bungalows and apartments and is designed to offer a sense of community whilst providing a range of amenities.

As more retirement villages are built so finding the right location is less of an issue and people can be near their friends and family and can have a choice as to where they want to live.

Lifestyle

The key attraction of a retirement village is that it promotes independent living in later life and many retirement villages will promote a luxury lifestyle. They offer a range of leisure facilities to promote general health and fitness including swimming pools, gyms and exercise classes as well as restaurants and bars plus the opportunity to enjoy social activities within a community of people of a similar age.

Retirement villages tend to be aimed at people who want to enjoy an independent lifestyle although as people get older some retirement villages can provide care and support for those who need it.

As people get older the thought of living in a large house which requires ongoing maintenance and upkeep becomes less appealing and, for some, a retirement village offers an attractive alternative with no hassles with repairs and maintenance. In addition, life in a retirement village may feel safer than, say, living alone, and friends and family can visit and normally rent a guest suite within the complex itself.

Costs

As appealing as a retirement village may sound, it is important to be mindful of the costs involved and most reputable developers of retirement villages make these costs fully transparent on their websites and brochures.

Initial Cost – this is the cost of buying the actual house, bungalow or apartment at the retirement village.

Service Charge – this is typically a monthly fee which covers any maintenance and the provision of the facilities.

Event Fee – this is often known as a ‘sinking fund’ and is paid to the retirement village operator when the property is sold, for example on death or when the resident moves into a care home. The event fee is typically calculated as a percentage of either the purchase price or the re-sale value and may be based on how long someone has lived in the property. It is usually capped and the amount can be as high as 15% - 30% of the value of the property.

Flexibility

Many retirement village developers offer alternatives to buying a property such as long term rental or buy-to-rent options. Some will even offer part-ownership.

In addition, developers will help with the sale of an existing property and may provide legal services and help with moving.

How Can We Help?

We can use our sophisticated cash flow modelling tools to see whether, taking into account the costs associated with the retirement village, you will remain financially independent.

Where additional capital has been raised by way of downsizing from an existing property, we can help you invest this money to ensure that your retirement and later life goals can be met.

We can model the impact of the event fee from an estate planning perspective whilst also helping you to mitigate any potential Inheritance Tax liability from downsizing from a larger property.

Conclusion

More and more people want to maintain their lifestyle as well as their independence throughout their later years and so demand for retirement villages is likely to increase in the UK as it has elsewhere in the world. The idea of living alone in a large property, especially for those people who are asset rich but income poor is becoming less attractive and it is no longer accepted that the main residence will simply be passed to the children.

Retirement villages are becoming increasingly popular but, as with anything that involves a financial commitment, it pays to do your research and be fully informed as to the exact costs and charges involved.

Contact Us

If you would like to discuss your retirement plans, please do contact us using the button below.