Compulsory savings accounts 'could help with aged care'

Compulsory savings accounts could be one solution to the issue of aged care funding, a new report has said.

The Productivity Commission's (PC) Caring For Older Australians draft report, which was obtained by the Financial Standard, argued that the average $250,000 aged care bond may be insufficient to meet the cost of aged care funding and that new options are now required.

"The PC said ways to address this are mechanisms such as compulsory aged care saving accounts or quarantining part of every retiree's superannuation lump sum benefit," reported the Financial Standard.

"But a funding option that has excited the PC the most is using equity release schemes even though the commission acknowledged there is a lot of nervousness around many of such schemes already in the marketplace."

Australians concerned about their long-term funding options could choose to compare savings accounts in search of the best returns. According to the PC report, the resistance to equity release schemes could be overcome if the government was to set up its own scheme that allowed retirees to use the proceeds of the equity sale in their home to draw down aged care and living costs as needed.

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