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Growing number of retirees set to face the challenge of funding care costs from their savings
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Average spend on care is now £75,000 per person, more than the average total pension pot
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More than twice as many women require long-term care compared to men
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One in five retirees have sold their home to pay care bill
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A quarter of UK adults with parents in care contribute towards their cost of care
Over the last decade the average length of stay in a care home has increased by 13% from 829 days to 955 days[i] – which equates to two years and seven months. However, figures from LV= reveal that the average Brit reaches retirement with a pension fund that would cover less than this.
As most retirees typically enjoy several years of active retirement, drawing on their pension before they reach a point where they require care[ii], the issue of affordability is likely to be far greater for retirees and their families than these figures show. The gender disparity when it comes to pension savings and income means that the care cost challenge is set to be more keenly felt by women. One in four (23%) women approaching retirement have only the state pension to rely on compared to just 9% of men, but women are more than twice as likely to go into care[iii].
The government recently announced that it was delaying the implementation of the care cost cap by four years, meaning that it is currently unclear how much someone will have to put towards their care. LV=’s research shows that, of those adults who have had a parent go into care, two-fifths (38%) said their parents used their savings to cover the cost of care, with one in five (22%) saying their parents sold their home to pay the bills.
According to a new Freedom of Information (FOI) data request by LV=, in the past five years, more than 19,000[iv] retirees have had a charge placed on their property by their local authority to meet the cost of their care. These charges are placed on the homes of individuals that don’t have enough savings to cover their costs, but have enough equity in their property.
While local authorities cannot ask a retiree’s family to contribute towards the cost of their parent’s care, many UK adults do so. While some adults contribute to ensure their parent can stay in their preferred care home, others help out in order to cover the basic costs of care. In fact, a quarter (25%) of adults with parents in care say that they are using their own money to help fund their parent’s care costs.
John Perks, Managing Director of LV= Retirement Solutions, said:
“The UK is facing an uncertain future on the funding of long-term care, especially with the care cap being delayed. Although many of us leave the workplace in good health, as we are living longer with the average retirement now 17 years long, the likelihood of us needing residential or domiciliary care is increasing. In addition, we are also seeing a rise in the length of time being spent in care. This highlights a very real need for many to consider a more flexible retirement income solution such as a fixed term annuity.
“Low interest rates, coupled with social care budgets being cut, create a worrying financial backdrop for many, especially those already in retirement as they are currently faced with an open ended bill which makes it difficult to plan effectively to fund these costs. We would encourage those individuals in and approaching retirement, to seek financial advice as to how they can make the most of their pension pots and potentially meet these costs.”
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