Innovation in the retirement sector

Within business spheres disruptive innovation creates new markets and value networks, eventually disrupting  existing markets, and displacing established firms, products and alliances.

These innovations are usually produced by outsiders and entrepreneurs rather than existing market-leading companies. 

Smart market leaders, however, can introduce innovations that add new life and value to existing products, and frustrate or even block prospective industry disruptors. An example of this is happening here in the retirement sector in South Africa.

Evergreen Lifestyle – a business that builds, owns and operates lifestyle retirement villages around the country – has turned to innovation in order to assist purchasers in a very tough economy. The business is built exclusively on the life rights purchase model, in step with leading retirement village industries in the USA, Australia and New Zealand. 

“Retirement operators in South Africa are finding it tough to sell retirement accommodation in the current soft property market as would-be retiree purchasers are unable to sell their family homes. This places enormous pressure on seniors who cannot delay their plans to scale down due to family, financial, heath or other urgent considerations,” says Arthur Case, brand ambassador for Evergreen Lifestyle retirement villages. 

Dr Andrew Golding, the chief executive of Pam Golding Properties, believes that with household finances under pressure for the foreseeable future, the focus will be on affordability, value-for-money and cost saving. Supply of residential property is growing in response to weak demand. This is not good news for seniors who need to sell now.

“The business has realised the incredible flexibility of the life right model and developed a flexible pricing product that is unequalled in the industry, and difficult for smaller players to replicate,” shares Adam Kajee, Financial Director of Evergreen Retirement Holdings. “The essence of flexible pricing is that seniors can purchase a life right for a new house or apartment at discounts of up to 30% of the list price.” 

“This could assist them in two ways. Those who are unable to sell their family home in the current climate are now able to price their homes more realistically to attract buyers. In turn, this enables them to purchase an Evergreen life right at a reduced price and remain cash neutral. Others may be able to liberate capital from the sale of their home after purchasing a life right, to bolster retirement savings,” he says.

Evergreen makes this model work financially by adjusting the return capital to the life right-holder’s estate on termination. Owned by the PSG Group and the Amdec Group it is able to take a long view of the business, incorporating this innovation. It is an advantage that sectional title, freehold and share block developers cannot match.

A second complementary innovation based on vertical integration has also been launched. In certain circumstances Evergreen is prepared to guarantee a minimum price for the sale of the purchaser’s family home, allowing the senior to move into an Evergreen home immediately. Evergreen will then make the necessary refurbishments to the vacant property to make it saleable and its in-house realtors will take the house to market at a preferential sales commission rate. 

Smart purchasers can access these innovations in tandem, making a move to Evergreen home more affordable.

Completing a trifecta of innovations, Evergreen has also introduced a try-before-you-buy opportunity for serious prospective purchasers. Spend two or three nights in one of their furnished houses or apartments before you sign a life right agreement and experience Evergreen hospitality first hand.

It’s retirement companies like this that are able to bring global innovation techniques to local shores and shake up the sector.

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