Retirement Villages: Homes for Thousands, Not Financial Traps

Recent commentary by Brian Peat has raised significant concerns about the retirement village sector in New Zealand. In his opinion piece published on August 18, 2025, Peat criticized the government for perceived inaction, described contracts as “unfair,” and likened retirement villages to a Ponzi scheme. While such passionate critiques can spark important discussions, they must also remain grounded in factual accuracy.

Retirement villages serve as homes for over 53,000 older New Zealanders who choose this lifestyle for its benefits. Contrary to Peat’s assertions, these communities are not financial scams. They operate under strict regulations, ensuring transparency and legality. Residents receive independent legal advice before signing any documents, and the terms of the licence-to-occupy model and deferred management fee (DMF) are clearly disclosed. These fees help fund essential services, security, and community facilities.

Peat’s most significant criticism revolves around exit payments. He claims that residents’ funds are “routinely held for years,” citing a figure of $2.8 billion in “interest-free funds.” This figure, however, misrepresents the financial landscape of retirement villages. It does not indicate cash reserves but rather the total value of resident units across various operators. These funds are tied up in infrastructure and services, not languishing in bank accounts waiting to be withdrawn.

On average, the time for exit payment repayment is approximately five and a half months. This duration, while slightly longer than last year, aligns with standard property settlement times. Operators do not benefit from these delays; they only receive their return when a new resident occupies the unit. In fact, more than 60% of operators now voluntarily pay interest if repayments exceed six months. Weekly fees cease when a resident exits, and the DMF is capped at that point to prevent escalating costs.

The suggestion that all exit payments should be held in trust may seem straightforward, but it poses significant challenges. If funds are held in trust, who would cover the costs of maintaining units and facilities? The reality is that retirement villages are long-term, capital-intensive projects. Research from Grant Thornton indicates that it can take over 20 years for these ventures to break even. Implementing rigid trust requirements could lead to increased fees and higher entry costs, jeopardizing smaller community and charitable villages.

Operators are currently investing in modern care facilities that directly benefit older New Zealanders. Disturbing the existing model would risk damaging both the infrastructure and the quality of care provided. Observations from Australia illustrate the potential pitfalls; mandatory buy-back rules led to higher fees, the closure of smaller villages, and reduced options for older individuals.

Peat also suggests that residents should share in “profits” from the retirement village model. This perspective overlooks the fundamental nature of these communities. Retirement villages are not investment vehicles but rather homes. The DMF is designed to recover the costs associated with running the community, including staff, maintenance, and services. Without it, both upfront and ongoing costs would rise sharply, making these communities inaccessible to many older New Zealanders.

Acknowledging residents’ concerns is essential, and there is support for reviewing the Retirement Villages Act to introduce clearer contracts, halt fees upon unit vacation, and strengthen dispute resolution processes. However, any reforms should be evidence-based and designed to preserve choice, rather than eliminate it.

Survey results consistently indicate that over 90% of residents are satisfied with their decision to live in retirement villages. They appreciate the safety, companionship, independence, and predictability of costs, as well as access to care when needed. To claim that they are “trapped” or “exploited” misrepresents the reality and undermines the choices of those who have made informed decisions.

Ultimately, moving to a retirement village is a personal choice, with about 130 older New Zealanders making that decision each week. Criticizing the choice of individuals who have received compulsory legal advice to understand their agreements does not reflect the values of New Zealand society. Retirement villages provide a community for thousands of residents, a fact that deserves respect and consideration.