1. Residential aged care July 2010

2. Disclaimer This presentation is given by a representative of Colonial First State Investments Limited AFS Licence 232468, ABN 98 002 348 352 (Colonial First State). Colonial First State Investments Limited ABN 98 002 348 352, AFS Licence 232468 (Colonial First State) is the issuer of interests in FirstChoice Personal Super, FirstChoice Wholesale Personal Super, FirstChoice Pension, FirstChoice Wholesale Pension and FirstChoice Employer Super from the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557 and interests in the Rollover & Superannuation Fund and the Personal Pension Plan from the Colonial First State Rollover & Superannuation Fund ABN 88 854 638 840 and interests in the Colonial First State Pooled Superannuation Trust ABN 51 982 884 624. The presenter does not receive specific payments or commissions for any advice given in this presentation. The presenter, other employees and directors of Colonial First State receive salaries, bonuses and other benefits from it. Colonial First State receives fees for investments in its products. For further detail please read our Financial Services Guide (FSG) available at colonialfirststate.com.au or by contacting our Investor Service Centre on 13 13 36. The information is taken from sources which are believed to be accurate but Colonial First State accepts no liability of any kind to any person who relies on the information contained in the presentation. This presentation is for adviser training purposes only and must not be made available to any client. This presentation cannot be used or copied in whole or part without our express written consent. © Colonial First State Investments Limited 2010.

3. Summary of Aged Care costs from 1 July 2010 CostsNursing homeHostel Entry fee – based on assets only at the time of entry Daily charge maximum of $26.88 (Assets - $37,500)/ 2080 up to maximum charge Lump sum based on capacity to pay or hostel’s agreed amount Assets - $37,500 = capacity to pay Basic daily care fee per day Standard $38.65 Non Standard $43.95 Protected $35.29 Phased * $35.89 Income tested fee – based on income assessed during residency 5/12 x (total assessable income – total assessable income free area) on a daily basis Max: $62.11 per day Income levels for max rate $75,400 single / $150,000 couple *Increased annually until 2013

4. Entry fees – extra service facilities  Usually request a bond  If the bond is requested, no accommodation charge can be requested  Extra Service facilities cannot request a bond where  an existing low care resident in an extra service facility transfers to an extra service place in the same facility  An existing high care resident paying an accommodation charge transfers to extra service place in the same facility  An existing resident transfers from a different facility. The remaining value of the bond transfers with them.

5. Assessing assets for aged care  Net value, fixed at date of entry  Voluntary assets assessment or full amount paid  Member of a couple – 50% of combined assets  Differs from Social Security assessment

6. Assessing certain assets AssetAged careSocial security Superannuation Based on whether lump sums can be withdrawn Based on whether client has reached aged pension age Purchased complying income streams Pre 20/09/07: 100% exempt On or after 20/09/07: counted Pre 20/09/07: 50% or 100% exempt On or after 20/09/07: counted Gifting Came under same rules as social security from 1/1/07 (gifting counted for assets from 10/05/06) Limited to $10,000 per financial year and $30,000 over 5 year rolling periods Deprived assets included for 5 years and deemed for income. Principal homeGenerally countedGenerally exempt

7. Principal home - aged care Exempt for aged care upon assets assessment principal home is occupied by:  a spouse or dependant child  a carer with 2 years residence, receiving income support payment  a close relation with 5 years residence, receiving income support payment  both criterion must be met to receive the exemption

8. Principal home - Social Security Exemptions  2 year exemption  Indefinite exemption if home is rented and  accommodation charge paid or accommodation bond periodic payments paid  Rental income exempt from social security and aged care  Homeowner status and assets thresholds retained

9. What are periodic payments - Hostels Interest payments added to the monthly fees  8.8 % pa interest from 1 July to 19 September 2010  not refunded when a resident leaves  does not pay off the outstanding balance of the bond  Retention amount payable of $307.50 per month  If the bond paid is insufficient retention amount added to monthly fees.  Five year limit

10. Tips for entry to aged care  Couples entering simultaneously may have the principal home exempted for each other  Assets could be less for entry aged care than assessed for social security payments eg pre 20.9.2007 complying income streams  Larger accommodation bonds strategically used to increase pension entitlements and reduce income tested fees  Some residential aged care facilities may reduce basic daily care fee if larger bonds are paid.  Entering aged care may increase age pension entitlements  Negotiating to periodic payment s will allow flexibility in exempting the principal home

11. Traps for entry to aged care  Reducing assets to minimise entry fees also reduces availability of placements  Periodic payments increase monthly fees, so cash flow is an issue  Assets could be more for entry aged care than assessed for social security payments eg principal home only exempted if certain criteria is met  Income streams purchased after 19.9.2007 don’t reduce assets or reduce ongoing fees in the long term  Full bond is not returned. $18,450 deducted over a maximum of 5 years or $307.50 per month. This amount is reset every July.

12. Other considerations  Do they have a Power of Attorney. Can they confer benefits upon themselves.  What do they want to do with the home – sell or rent ? Clients will usually want to choose the best facility they can afford rather than a fee reduction strategy. How will you assist them in achieving this goal ? Reducing entry costs by minimising return or gifting investments is not a good strategy.  Consider education of the client rather than complying with their requests.

13. Residential aged care ongoing fees

14. Ongoing fees as at 1 July 2010  Basic daily care fee  Income tested fee  Extra service charges  additional service fees  Periodic payments  Retention amount  20 September 2009 changes

15. Basic daily care fee and income free area Type of aged care resident Max Basic daily care fee Income free area per fortnight Single Married Standard$38.65$816.50$798.50 Non standard$43.95$816.50$798.50 Protected$35.29$734.50$716.50 Phased$35.89$746.23$728.23 Daily income tested fee = 5/12 x (total assessable income – total assessable income free area) / 14 = daily income tested fee

16. Standard Resident  Greatest number of clients  pensioners with  low income and a high rate of pension  generally receiving post 20 September rate  For example pensioners with financial assets only  Single $222,400 or less  Member of a couple $209,600 each or less  Self funded retirees with high a level assets deriving very little assessable income - allocated pensions.  Check pension entitlement for self funded retirees to illness separated rate paid.

17. Phased residents  Second biggest group of clients  Entered care on or after 20 September 2009.  Self funded retirees with high levels of income or pensioners with  High income  low rate pensioners receiving the transitional rate of pension.  Take care as changes to their finances which could trigger the September 20 rate which has a reduced pension cut off figure.  Check self funded retirees entitlement to pension

18. Protected residents  Entered care between 21 March 2008 and 19 September 2009  Self funded retirees with high levels of income  Pensioners with  High income and a low rate of pension  generally receiving the transitional rate of pension. Therefore income test taper is 40 %. Also higher income cut off than the post 20 September pensioners.  Clients who have moved to a higher level of care and fees have changed.  Clients may have reached the end of the Centrelink / DVA 2 year exemption of the principal home and selling and now seeking financial advice

19. Non standard resident  Least number of clients  Very few non-standard residents.  Entered age care before 20 March 2008.  Relatively few of these clients would seek financial advice as most likely have already organised their financial affairs  In aged care now for more than two years  May be changing their facility, could have received an inheritance or are reorganising their finances.

20. Additional or Extra service charges  Extra service residents are required to pay an additional fee for these services  Extra service amount can only be charged if provision of extras is significantly higher than average  No set amount. Extra service provider sets the fees that residents are asked to pay for but these fees must be approved by the Department of Health and Ageing.  Not in lieu of an entry contribution. May also pay an accommodation bond regardless of whether high care or low care accommodation.  Additional service fee – services such as newspapers and hairdressing.

21. Periodic payments - Hostels Interest payments added to the monthly fees  8.8 % pa interest from 1 July to 20 September 2010  not refunded when a resident leaves  does not pay off the outstanding balance of the bond  Retention amount payable of $307.50 per month  If the bond paid is insufficient retention amount added to monthly fees.  Five year limit

22. Retention amount - Hostels  At present $307.50 per month for residents entering from 1 July 2010  Will be reset 1 July 2011  Deducted from the bond unless insufficient bond is paid  Consequences are the full amount of bond not returned to the client  $18,450 is the maximum amount able to be retained after 5 years residency.

23. Issues to consider for ongoing fees  Generally entering aged care may increase pension entitlements  Larger accommodation bonds reduces income tested fees and can increase pension entitlements via social security means test  Actual income can be higher than assessable income due to social security income test being applied  Some residential aged care facilities may reduce basic daily care fee if larger bonds are paid.  Periodic payments increase monthly fees, so cash flow is an issue  Income streams purchased after 19 Sept 2007 don’t reduce assets or necessarily reduce ongoing fees  Non income producing assets don’t affect income tested fees

24. Points to remember  What do they want to do with the home – sell or rent ?  Clients will usually want to choose the best facility they can afford rather than a fee reduction strategy. How will you assist them in achieving this goal ?  Reducing income tested fees by minimising return on investments is not always the best strategy.  Consider education of the client rather than complying with their requests.  Clients receiving the post 20 September rate have a lower cut off for pension payments than those on the transitional rate. Difference is $4,772 pa single / $11,635 married

25. Questions