Retirement villages offer a desirable lifestyle choice for some. But what protection do you have if things go wrong? We look at what you need to consider, plus we've developed a free downloadable checklist for assessing a retirement village: Retirement villages checklist (47.2 KB)

Promises were plenty at Wanaka Bay Village in New Plymouth. Over 100 luxury villas were planned, complete with swimming pool, spa, all-weather tennis court, bowling green and gym. But when the retirement village folded in September 2012, 5 years after it opened, only 9 of the villas had been built.

Kate Sheppard retirement village was effectively destroyed by the Canterbury earthquakes (see "Cracks in the code", below.)
Kate Sheppard retirement village was effectively destroyed by the Canterbury earthquakes (see "Cracks in the code", below.)

Residents of the village have since moved out. A buy-out deal involving another operator has seen them finally able to get on with their lives after months of financial uncertainty. The 9 brick-and-tile units have been advertised on TradeMe for rent at $360 a week each.

Industry commentators say Wanaka Bay's demise is unfortunate but doesn't indicate wider troubles in the sector. The Retirement Villages Association, which represents 80 percent of villages, says companies fail from time to time in any industry and the sector is still geared for growth.

Receivership may be a worst case but the Wanaka Bay saga exposes the risks consumers face when a village fails to deliver on its grandiose plans. While you can check in any time you like, it's hard to get out without taking a financial hit if the reality doesn't match the rhetoric.

Market growth

Retirement villages have grown rapidly over the last decade. Data from the Companies Office show there are 348 registered villages.

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Customer satisfaction

Around 5 percent of Kiwis over 65 have moved to a retirement village. Research indicates most believe it was the right thing for them. Bill Atkinson from the Association of Residents of Retirement Villages calls it the "best move" he ever made.

But it's not all beer and bowling greens. Bill says the Retirement Villages Act, introduced in 2003 in an effort to protect residents in the rapidly expanding market, is "far too open to interpretation". He says standards vary as a result and residents bear the brunt of poor performers.

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Financial safeguards

Several reports for the Retirement Commissioner have also flagged concerns about the financial oversight of villages and the role of the statutory supervisor. The Act requires all villages (unless they have an exemption) to appoint a statutory supervisor to monitor their financial position.

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Consumer protection

Changes that came in late 2012 now require statutory supervisors to be licensed by the Financial Markets Authority (FMA). Licences have been granted to 8 companies, subject to conditions. Supervisors are required to report regularly to the FMA, with the first reports due at the end of March 2013.

Retirement Commissioner Diana Crossan says there's still more that can be done to clarify the supervisor's role, including the extent to which they act as advocates for residents. She says this should be considered in a review of the legislation. The issue of an independent advocate for residents also warrants "more thinking".

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Our view

  • Moving into a village is a major decision with significant financial implications. If you make the wrong call, it's not always easy to back out without financial loss.
  • Given the risks, legislation needs to ensure there's effective scrutiny of the market and safeguards for consumers.
  • We support calls for an independent consumer-advice service for residents and intending residents. Consumers also need access to a workable complaints process.

Report by Jessica Wilson.