Record Rise in Care Home Costs as Pensioner Incomes Stagnate

The average annual cost of a care home in Great Britain jumped by 9.6% between 2016 and 2017 – the largest increase on record and nearly double the 5.2% rise a year earlier, according to research from Prestige Nursing + Care.

The latest edition of the six-year study found that the average cost of a care home in Great Britain reached a new high of £33,094 a year in 2017 – £2,978 more than the £30,926 average recorded in 2016.

While care home costs are rising at a record rate, pensioners have seen their incomes stagnate over the past year. According to data from the Department of Work and Pensions (DWP), the average pensioner saw their income increase by just 0.5% from £14,456 to £14,522 – well below care home price growth and the current 2.8% rate of inflation*.

The growth in care home costs has also outpaced the growth in pensioners’ incomes over a longer period. Since 2012, the cost of the average care home has risen by 23.7% from £27,404 (an increase of £6,500), while the average pensioner’s income has risen by 9.9% from £13,208 (an increase of £1,314).

Pensioners short by £373 a week if they require residential care

This fall in affordability means the shortfall between the annual cost of a care home and pensioners’ incomes has grown substantially. In the past year, the difference between care home costs and pensioners’ incomes has risen by 17.7% from £16,470 to £19,382. In total, the annual cost of a care home now equates to 133.5% of the average pensioner’s income.

This means the average pensioner’s income would now pay for approximately just five months of care – despite research from Saga showing the average stay in a residential home is 2.5 years**, which would cost a total of £84,760 based on the market average price in 2017.

Table 1: Annual care cost vs pensioner income 2012-17

  2012 2013 2014 2015 2016 2017
Annual cost of a care home £27,404 £28,367 £28,666 £29,389 (+2.5%) £30,926 £33,904
(+3.5%) (+1.1%) (+5.2%) (+9.6%)
Annual pensioner income £13,208 £13,799 £13,993 £14,300 (+2.2%) £14,456 £14,522
(+4.5%) (+1.4%) (+1.1%) (-0.5%)
Annual shortfall £14,196 £14,568 £14,673 £15,089 (+2.8%) £16,470 £19,382
(+2.6%) (+0.7%) (+9.1%) (+17.7%)
Shortfall vs. annual income 107.50% 105.60% 104.90% 105.50% 113.90% 133.46%

Source: Prestige Nursing + Care (Annual increase shown in brackets)


Jonathan Bruce, managing director of Prestige Nursing + Care commented on the findings:

“It is alarming to see care home costs continue to rise so out of sync with pensioners’ incomes. With later life incomes stagnating, the rising cost of care will eat away at a growing number of families’ finances as they use their assets to meet bills for vital support. This reinforces the fact that we are facing a serious and prolonged social care crisis. Spiralling costs mean people must talk about how they will fund care for themselves or their loved ones earlier, and avoid being stung.

“The enormity of the challenges facing the sector means there is a desperate need for a political solution to the crisis. While fixing social care will not be easy, it can be turned around if policymakers set out a concrete plan that takes into account the need of patients, providers and councils. A freefall in standards across the sector is unacceptable in one of the richest countries in the world. While the Brexit negotiations are dominating political discourse at the moment, the upcoming social care green paper offers an opportunity to put things right – hopefully the government will seize it.”

The East of England has the least affordable care homes

The East of England maintained its position as the region with the least affordable care homes in the country for the third year running, with a cost-income shortfall of £25,636. This was the result of a 7.7% increase in care home costs (from £37,908 to £40,820) coupled with a modest 0.7% increase in regional pensioner incomes (rising from £15,080 to £15,184). The rise in the average cost of a care home means that the East of England has now also overtaken London as the region with the most expensive care homes in Great Britain.

The East Midlands saw the largest overall increase in the cost of a care home last year, rising 17.7%  to £33,956. With an average regional pensioner income of £14,650, the regional cost-income shortfall increased by 30.4% to £19,396.

Similar to last year’s study, the North East still has the most affordable care homes of any region, with a cost-income shortfall of £12,012. However, as a result of rapid growth in care home costs (16.3%) and a small reduction in pensioner income (-0.4%), the region experienced a 43.5% increase in this shortfall, which is the largest recorded.

Yorkshire and the Humber is the only region to see care home affordability improve year-on-year. With pensioners’ incomes rising faster than care costs (3.0% versus 1.3%), the shortfall fell by 0.3% to a nonetheless sizeable £14,872.

Table 2: Regional care home costs vs annual pensioner income growth

Care home region 2017 Annual
Cost of a Care Home

(Annual change)

2017 Annual
Pensioner Income
(Annual change)
2017 Care Cost Shortfall (Annual change)
East of England £40,820 (7.7%) £15,184 (0.7%) £25,636 (12.3%)
East Midlands £33,956 (17.7%) £14,560 (4.1%) £19,396 (30.4%)
London £39,988 (2.8%) £16,848 (0.6%) £23,140 (4.5%)
North East £25,636 (16.3%) £13,624 (-0.4%) £12,012 (43.5%)
North West £29,432 (7.2%) £14,196 (-2.2%) £15,236 (17.7%)
Scotland £32,448 (11.2%) £14,404 (1.1%) £18,044 (20.9%)
South East £39,364 (14.7%) £15,756 (0.7%) £23,608 (26.5%)
South West £38,324 (8.4%) £14,300 (0.7%) £24,024 (13.5%)
Wales £30,940 (7.0%) £13,416 (-0.8%) £17,524 (13.9%)
West Midlands £33,228 (16.0%) £13,364 (-2.7%) £19,864 (33.1%)
Yorkshire and the Humber £28,964 (1.3%) £14,092 (3%) £14,872 (-0.3%)
Average £33,904 (9.6%) £14,522 (0.5%) £19,382 (17.7%)

Source: Prestige Nursing + Care (Annual change shown in brackets)


Care home costs equal over 40 hours a week of home care

The average cost of a residential care home (£33,904) is equal to 2,260 hours of home care at a price of £15 an hour, which would amount to 43.4 hours of care a week***. As the average number of hours that home care patients receive is just 12.2 a week****, this means care at home can cost as little as £183 a week or £9,516 a year.

This is a saving of £24,388 when compared to the cost of a care home, and is over £5,000 less (£5,006) than the average pensioner income. Therefore, for those whose needs can be met in their own home, care at home can offer a far cheaper alternative than moving into a residential care home.

Jonathan Bruce adds:

“With the cost of residential care rising faster than ever, it is important that those in need of care are helped to consider all their options. For many, homecare can provide an appealing and more affordable alternative that potentially offers considerable savings. Many people also prefer to stay in their own homes in later life.

“As our population ages and more people require care in later life, we need to make more effort as a society to openly discuss care preferences and the issues of funding ahead of time, so that people are better prepared to make these important decisions at the point that care is needed.”










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