If you or a family member is considering moving into an Aged Care Facility, it’s vital to receive advice on the financial aspects, and how your circumstances and choices could impact the costs of Aged Care, your assets and estate planning. Below is a case study which outlines a strategy to use Challenger’s CarePlus.  What is CarePlus? Challenger’s CarePlus helps to manage aged care costs by providing regular payments for the life of the investor as well as providing the peace of mind that 100% of the amount invested will be paid on death to either a nominated beneficiary or to the estate of the investor…(residents of South Australia receive 100% less stamp duty, currently 1.5%)…

By guest author:  Challenger

Meet Donald

Donald is 83 and widowed. He was living on his own for some time after his wife passed away, but has become frail with age.

After researching his options with the help of his family, Donald was assessed by an Aged Care Assessment Team as requiring residential care and found a suitable aged care home to move into.

Donald’s chosen room in the residential aged care home has an advertised accommodation payment of $550,000. He agrees to that amount and sells his home to pay the  Refundable Accommodation Deposit (RAD) RAD of $550,000. He now has $700,000 in term deposits and $50,000 in cash and wants to explore other strategies for this money.

If Donald leaves his money in cash and term deposits, based on rates and thresholds as at 20 September 2017, his year one estimated Age Pension entitlement is nil. Also, his total aged care fees are $38,631 (consisting of a basic daily care fee of $18,038 and a means-tested care fee of $20,593).

Donald visits a financial adviser to find out what his aged care costs will be and how it will affect his cashflow which includes $5,000 per annum of other ongoing living expenses.

Donald’s assets

After paying a RAD of $550,000 Donald has $700,000 in term deposits, $50,000 in cash and $5,000 in personal effects.


To pay his ongoing aged care fees and living expenses, provide an inheritance for his children and retain access to some funds.

The financial adviser’s recommendation

The first strategy Donald’s financial adviser considers is to retain his existing portfolio of term deposits and cash.

His financial adviser estimates, if the strategy was implemented, Donald’s total ongoing aged care costs over the next three years are projected to be $115,610. After factoring in his total income over three years, including the Age Pension, there is a total shortfall of $56,087 that will need to be funded.

Donald’s financial adviser explores alternate strategies to help improve this outcome. These include an investment bond within a private trust and an investment in Challenger CarePlus (CarePlus).

His adviser explains that the most appropriate strategy will be one that helps meet his ongoing cash flow and estate planning wishes.

CarePlus is designed especially for those who are eligible to receive Government-subsidised aged care services (including both home and residential care) or who are living in an approved residential aged care facility.

CarePlus provides Donald with a guaranteed regular income for the rest of his life to help cover the costs of aged care and living expenses.

When Donald passes away, 100%

[CarePlus provides a death benefit of 100% of the total amount invested unless you reside in South Australia, where stamp duty (currently 1.5% of the insurance premium) will be deducted from the sum insured before it is distributed to beneficiaries] of the amount he invested will be paid to his nominated beneficiaries or his estate.


CarePlus may also help reduce Donald’s aged care fees as a result of the effective way CarePlus interacts with Centrelink and aged care rules.

To help Donald achieve his objectives, his financial adviser recommends an investment of $650,000 into CarePlus.

The remaining $100,000 will stay in cash in case he needs access to additional funds. Figure 1 compares the outcomes of the different strategies in year one. Figure 2 illustrates the outcome for a period of three years.

By investing in CarePlus, Donald can improve his cash flow in year one. He can also maximise the value of any benefit payable to his children directly or via his estate when he passes away.

Strategy considerations

By implementing a strategy using CarePlus Donald will have:

  • a guaranteed income stream from CarePlus to pay for aged care fees

  • improved cash flow (after expenses) of $10,740 in year one, increasing to $30,161 over a three year period

  • an increased benefit to the estate of $10,740 at the end of year one, increasing to $30,161 over a three year period (under each strategy the RAD of $550,000 will be paid to the estate)

  •  a $8,298 higher Age Pension entitlement in year one and a reduction of  his means-tested care fee by $2,131.

Over the three year period the estimated difference in Age Pension is $22,493, and means-tested care fee is $5,788.

The cash flow and estate planning benefits of the CarePlus strategy can continue past the three year illustrated period while Donald remains in care.

If you would like to arrange an Aged Care Advice appointment with our Aged Care Professional, Jeanette O’Connor, please email or call her on (02) 4455 5333.

Related links:

My Aged Care