Care Crisis: Two Thirds of Near-Retirees are Not Factoring Cost of Long-term Care into Their Retirement Years

Two thirds (71%) of over-45s are not factoring the cost of long-term care into their retirement planning, according to financial planner Tilney. Despite the UK’s ageing population putting increasing strain on public health services, more than one in five (22%) over-45s are confident their long-term health care will be entirely funded by the government.

But public finances are stretched, with nine out of ten local authorities in England having raised council tax this month to help cover the cost of social care.^[1] And of the 2.8 million older people with care related needs in the UK, 900,000 currently do not receive any formal support (Age UK). On top of this, as a person only qualifies for funded care if their home, savings and investments are together worth less than £23,250, a huge portion of people will need to foot their own bill, Yet less than one in three over-45s are even considering the costs.

The research, from Tilney’s Cost of Tomorrow Report, also found two in five (39%) over-45s do not believe they will ever need long-term care, but recent data shows one in six people above the age of 85 currently live in care homes. This number is likely to increase as people live longer, with UK life expectancy forecast to reach 85 for women and 83 for men by 2030, according to a recent study funded by the UK Medical Research Council.^[2] Taking a more traditional view, one in ten (10%) believe their family will help with long-term care, whether it’s covering the cost or taking responsibility for the care themselves.

According to recent research, depending on where in the UK you live, care homes can cost an average of around £30,000 a year for a residential care home, and up to £40,000 per year if nursing is required.^[3] There are currently more than 400,000 people aged 65 and over in care homes in the UK.^[4]

While most over-45s are not factoring in such costs in their retirement, holidays dominate their view of the future, with two in five (37%) considering multiple trips abroad as important goals and almost one in three (28%) saying the same about ‘staycations’. Worryingly, according to Tilney, those yet to retire underestimate the amount they will spend in non-working years by almost £100,000.*

Andy Cowan, Head of Financial Planning at Tilney, said: “There are almost three million people in the UK with care-related needs and with public health services already stretched, many are not receiving any formal support. It’s important that people begin to recognise the possibility that they will need care in old age and start thinking about how they can make financial provisions for this, to make later life as comfortable as possible.

“This can often be a taboo conversation among families, but it shouldn’t be. There is a danger that too many are burying their heads in the sand when it comes to facing the cost of care. Family members should be openly discussing how they are going to work together to cover the cost of care should it be needed, and for those who seek financial advice, the cost of care discussion should be high on the agenda for pre-retirees. The next Government also needs to tackle the issue head on and hopefully we’ll see the UK’s political parties considering new incentives to encourage earmarked long-term care savings in their upcoming election manifestos.

[1] https://www.theguardian.com/money/2017/mar/27/council-tax-bills-rise-english-local-authorities

[2] Future life expectancy in 35 industrialised countries: projections with a Bayesian model ensemble http://thelancet.com/journals/lancet/article/PIIS0140-6736%2816%2932381-9/fulltext

[3] Laing & Buisson Care of Older People UK Market Report 2014/15

[4] Age UK report – Later Life in the United Kingdom https://www.ageuk.org.uk/Documents/EN-GB/Factsheets/Later_Life_UK_factsheet.pdf?dtrk=true