- Few of us are making financial provision for the care we may well need in later life
- Going into a care home now costs up to £50,000 a year in some parts of the UK
- What are the criteria for getting your local authority to fund your care?
- How can you find out if YOU have enough tucked away?
Despite the cost of later life care soaring in recent years, hardly any of us are actually making any plans to pay for it.
According to a new global study by Aegon, social care “barely registers as a planning or funding priority when it comes to retirement planning”.
At present, less than one in 14 individuals (7%) in the UK view putting money away to fund possible future social care needs as a priority, with just 1% regarding it as their single greatest financial priority.
This is against a backdrop of average weekly care home fees across the UK spiralling in recent years to £645 a week for residential care, and up to £910 a week for nursing care in a specialist dementia care home.
Moreover, those average figures mask big regional disparities. For those living in the London, South East and East of England, the average cost of dementia care is up to £1,059 a week (£55,000 a year), while even standard residential care is up to £775 a week (£40,300 pa) on average.
For those who prefer to remain living independently in their own home, there can still be considerable costs to cover for home care services as our health and mobility deteriorate. Average costs for home care are currently around £15 an hour.
Who pays what?
For those in need to go into a care home, anyone with less than a very modest £23,250 of savings will receive a level of support from their local council; however, anyone above that threshold will have to fund themselves. Those with between £14,250 and £23,250 will be expected to pay part of the cost.
These bald facts, however, are not generally understood by many of us.
“Not placing priority on funding in advance for a possible need for long-term care in older age may be down to the perception that it’s something the government will deal with when the time comes,” says Aegon. “In fact, two in five (38%) say they haven’t factored in care as a future expense because it will be provided by the NHS, while 31% simply haven’t considered it at all.”
Steven Cameron, Pensions Director at Aegon adds: “Many individuals face significant and at times catastrophic costs, wiping out their life savings, if they need to go into a care home. It may be that too many people still believe that social care funding is an issue for the government to sort out. All too often, people wrongly believe that their social care needs in later life will also be taken care of by the state.”
Another important statistic is that for those of us who reach 65, men can expect to live (on average) to the age of 83.6; while women will go on to reach 86 So what should anyone heading towards retirement be doing to ensure they have taken into account the cost of care?
How big a priority paying for care will be depends upon each individual’s financial and personal situation. If you have little in the way of savings and no asset in your home, you should be able to call upon your local council to fund your care. However, local authorities have strict criteria about providing care for all but the most urgent needs, and – according to Age UK – the number of older people with some unmet need for care now stands at 1.5 million… one in seven of the entire older population.
If you rely on council funding you will also have little choice about the care provider or the location.
For those with savings above the £23,250 threshold, you will be expected to entirely self-fund until your savings are reduced to that level, whereupon you might well find yourself having to move to a care home of the council’s choice. If you have between £14,250 and £23,250, you will be expected to pay part of the cost.
For an individual owning their own home, the value of that home will be used to fund residential care. That property is protected for couples where one individual remains in the home.
What’s the best way forward?
For anyone heading towards retirement, it’s well worth looking hard at future options and, at the very least, factoring in the cost of homecare: the most likely scenario for most of us.
Anyone making a will should also take expert legal advice on how to protect their assets, as far as it is possible, in the event of going into care.
There are also various types of investment bonds – including care bonds – which can help pay towards future care costs and which have a number of tax advantages. Again, expert advice is required before going down this road.
And, of course, it may be that the individual is happy to use up the equity they have in their home – although it can be worth consulting with family members expecting to inherit before doing so.
As I indicated earlier, everyone’s situation is different. But if you’d like a clearer picture on whether your current rate of savings will enable you to fund your care in later years, one very simple route is to use an online retirement planning tool such as www.retireeasy.co.uk. You can feed in your assets and predicted outgoings, and then play out a variety of scenarios to see the impact of funding home care or going into residential care later on.
That way, you can make any necessary adjustments well ahead of time.