New research from private client stockbroker and wealth manager Killik & Co and the Centre for Economics and Business Research reveals how the cost of care continues to outpace income, forcing the need to consider alternative funding options.
Over the past 26 years, the cost of residential care has increased by 237% from £8,300 to £29,300 per year and over the same period nursing fees have risen 259% from £11,900 to £39,300. Those starting their stay in 2016 will face an average total cost of £60,700 for nursing care or £72,800 for residential care. Based on current trends, by 2035 the annual fee for care with nursing is predicted to rise to £69,500 and residential care fees to £51,800. It is important to make the distinction between residential homes, for those who have problems living independently, and nursing homes, for the elderly with long-term health conditions. The rising cost of all care fees continues to outpace inflation.
The delay in the care cap to 2020 will undoubtedly impact the industry but the introduction of the new National Living Wage (NLW), due in 2016, poses a bigger threat. Recently the UK Homecare Association highlighted the major issue of who will support the additional costs of those receiving state-funded care at home. It is predicted the industry will require £753 million from the council and the NHS in the first year alone. The care home industry’s workforce is often low paid and mostly over 25. Over the years to come, with the NLW to be implemented and the delay in care cap to 2020, this sector will surely suffer more than others.
Pensioners’ incomes alone do not meet the cost of care, with residential care fees exceeding the average pensioners’ income by 65% however 70% of pensioners have sufficient wealth tied up in property that could be used to fund an average stay in residential care but many could be forced to sell the family home to release capital.
The cost of care differs across the UK, with the East of England the most expensive region at £33,800 and the most affordable is the North East at £24,232 and then the East Midlands at £26,104. Scotland is an exception, providing free personal care to those assessed as being eligible.
Sarah Lord, Managing Director of Killik Chartered Financial Planners, comments:
“The fact that we are all living longer than ever before is clearly something to celebrate but it also means that some form of care in our old age is likely to be a reality for many of us. The bad news is that as the cost of care continues to rise faster than inflation it needs careful consideration, as part of wider family financial planning, on how it would be funded to ensure we are cared for as we would wish to be in our twilight years”
 Open letter to Chancellor of the Exchequer on National Living Wage from UKHCA’s policy director Colin Angel
 Prestige Nursing + Care. Note regional figures from different source as national averages, so not comparable.