It’s no secret that I’m passionate about retirement living communities. After all, it’s something that most of us will have to consider at some point. And when that time comes, shouldn’t we all have the opportunity to make choices that enhance our lives?
But what are those choices and how do we know that the options on offer today, are the ones we’ll want when we retire? At Octopus Healthcare, these are the sorts of questions we ask all the time because we’re not just investing in ‘now’ but the future too.
A big part of this conversation is the concept of retirement communities. And while it’s not a new idea, it is still in relative infancy in the UK – so how do we continue to move forward?
A global view of retirement living
With a penetration rate of nearly 6%, the US retirement community market is one of the most established. They have great choice with a wide range of developments and service offerings that focus on the customer, providing aspirational living. One popular model allows residents to enjoy a vast range of quality facilities and desirable accommodation in return for a one-off entrance fee and monthly service charge. This works really well for both consumers and investors alike and we may one day see this make it to the UK.
The blueprint for retirement living in Australia and New Zealand is more familiar as it’s essentially a home ownership model. Residents, like their US counterparts, enjoy high standards of living with leisure amenities and care as required, but much of the operating costs are recouped through a deferred management fee. Even though the tenure and charging options are quite distinct compared to the US, both countries have similar level of healthy market penetration levels (5.3% and 5% respectively and growth).
Japan chose to fundamentally change their healthcare system rather than mimic the more ‘conventional’ retirement community model. The Long-term Care Insurance System focuses on helping older people stay in their own homes. Elsewhere in Asia, China and Malaysia have seen a rising interest in retirement villages and is challenging the tradition of multi-generational living.
Retirement living closer to home
Some of my favourite retirement communities have been developed in mainland Europe, in Germany, Switzerland and Sweden. I have seen some really beautiful upscale developments for older people that offer great services and support. One interesting development comes from Netherlands, with a steer towards social inclusion – integrating retirement villages into broader society. The well-known Humanitas have gone a step further with a scheme that revolves around the care home model, but in order to create an intergenerational element, students get free accommodation in the home in exchange for their time. It’s encouraging to see so much innovation and creativity in making communities work in different contexts.
In the UK, a significant amount of development in the last 15 years has been in retirement communities subsidised by the government for affordable rent and this has created a vibrant sector with many wonderful communities. However, the UK is defined by high levels of home ownership and this is most true for our older population. They are proud to own their homes and would like to continue to benefit from increasing property values they have seen over their lifetimes. The challenge in the UK is to bring the same opportunity that we have seen in affordable housing to the majority of our home owning older people.
Understanding universal challenges
Conversely, those market penetration levels in the US, Australia and New Zealand, tell another story – that more than 90% of retirees are choosing not to live in retirement communities. Perhaps the challenges are more universal than we realise?
In the UK and US, cost remains the biggest barriers to retirement community living. Deferred management fees have been the way forward in countries with similar characteristics to our own, like New Zealand and Australasia. The positive endorsement of them here from the Law Commission certainly seems to have heralded a positive step change in consumer confidence and investor interest.
There’s also a challenge with retirement communities being widely understood by the general public as a choice. All of the retirement communities I have seen are a world away from the look or feel of ‘old people’s homes’ or sterile institutions. Indeed, I have seen some of the most desirable real estate in the UK with great services. Thankfully we are now seeing this understanding about great lifestyle and real estate replace a less positive view, perhaps based on municipal sheltered housing of previous generations.
Paving the way ahead
Despite a patchwork blanket of retirement models across the world, the challenges remain (reassuringly) similar. We should be mindful of the challenges that our international counterparts face but stay grounded and appreciate where the UK market currently is.
So, perhaps the biggest lesson for us all to learn in this arena, is to look at who we’re creating these communities for. It’s clear to me, that no matter where we are, we all want the opportunity to live a fulfilling and dignified retirement. It’s why I’m proud to be part of the solution that’s given our retirees the choice to make their home in communities that we have invested in – that take the best of all worlds to deliver innovative, homegrown solutions fit for the future.