Page 10 - Understanding Aged Care
P. 10
UNDERSTANDING AGED CARE
Residual value When is it an appropriate
strategy to use?
The residual value refers to the value of the
annuity that is returned as a lump sum at the As annuities may offer a lower rate of return
end of the nominated term. This value can than some other investment types, the decision
range from 0% - 100% of the purchase price. to purchase an annuity is usually a mixture of
You can elect to purchase another annuity at various factors:
term duration with the residual value or receive
a refund. • Your risk profile as an investor
(annuities may be lower in risk)
Other factors
• Your need to receive regular set
Another factor that will determine your income income payments to fund your cashflow
payment will be the rate of return offered by the commitments
insurance company. This rate is set at entry and
is usually determined with reference to current • The taxation treatment of your annuity
cash and fixed interest returns. income
Income payments • The potential for more favourable
Centrelink/DVA income test treatment
You can usually elect to receive income applied to your annuity income
payments monthly, quarterly, half yearly or (certain rules apply)
yearly. You may also be able to index your
income payments in line with the Consumer • A reduction of the Centrelink/ DVA asset
Price Index (CPI) or at a set percentage rate test value over time may increase your age
each year. pension entitlements (if you are impacted by
the assets test)
• Whether the use of an annuity can reduce
your means-tested care fees due to reduced
assessable assets and/or income
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