Recent figures released by the Office for National Statistics (ONS) confirm that the number of people in the UK aged over 85 will nearly double by 2045.
The report confirms that the number of over-85s will rise from 1.7 million (or 2.5% of the population) in 2020 to 3.1 million (4.3%) by 2045.
The UK’s social care system is already under enormous pressure and that is set to increase. If you are approaching retirement, or are in retirement now, the figures will come as a stark reminder of the importance of a financial plan. And especially one that includes funds to cover the cost of later-life care.
Social care doesn’t come cheap
The cost of care varies greatly depending on the type of care you need, how often, and where you are in the country.
Even before you consider the costs of moving into a care home or a retirement village, domiciliary care – care in your own home – could cost upwards of £20 an hour. Just 15 hours a week at that rate would cost £1,200 a month or close to £15,000 a year.
The not-for-profit company PayingForCare confirms that the average cost for residential care in 2020 was more than £34,000 a year, rising to £48,000 where nursing care was included.
When you’ve calculated the potential costs of care, you’ll also need to remember that you might need domiciliary care before you move into a home, meaning the two costs will be combined.
It’s important to remember that fees vary widely across the UK. Fees aren’t static either and will rise with inflation.
You could face a £150,000 “black hole” despite recent government reforms
Back in September 2021, Boris Johnson announced a new “Health and Social Care Levy”. The 1.25 percentage point rise in National Insurance has been earmarked for social care, as well as a health-based Covid response. At the same time, the prime minister confirmed a new cap on lifetime social care costs.
Under current rules, those with assets exceeding ÂŁ23,250 must pay for their social care with no upper cap on costs.
The new cap, due to come into force in October 2023, will lower the threshold at which you have to start contributing. Those holding assets worth ÂŁ20,000 to ÂŁ100,000 will need to contribute on a sliding scale.
If you have assets worth more than ÂŁ100,000, you will need to cover all fees until the value of your assets falls below the ÂŁ100,000 threshold.
However, the new lifetime social care “cap” of £86,000 means that no individual will be asked to pay more than this sum for care in their lifetime. The cap does not include accommodation and living costs.
Figures published by the Telegraph at the end of last year suggest that the average Brit in need of later-life care will find themselves needing to save an extra ÂŁ150,000 to cover care costs. This black hole will mean millions of pensioners could be forced to work for longer, sell their homes to pay for care, or not receive the level of care they need.
A good financial plan can ensure you have enough to pay for care
As holistic financial planners, we can help you to understand your different income streams.
We will consider your pensions, savings and investments, and other income like that from buy-to-let properties.
This allows us to build a long-term plan aligned to your goals, based on you living your dream retirement while having enough put aside to pay for care costs if they arise.
This is likely to involve pensions and tax-efficient investment products like ISAs.
We can also put plans in place for what will happen to the money set aside for care if you don’t need it for that purpose.
A long-term plan should mean you don’t need to use the value tied up in your home but that might be the right choice for some.
You’ll need to be aware that equity release reduces the value of your estate and can affect your eligibility for means-tested benefits, so be sure to speak to the experts before you decide.
Get in touch
If you’d like help planning for the potential costs of later-life care or help with any aspect of your long-term financial plans, please get in touch. Email info@lloydosullivan.co.uk or call 020 8941 9779.
Please don’t hesitate to share this article with your friends and family, or anyone else who you think might benefit.
Please note:
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Equity Release will reduce the value of your estate and can affect your eligibility for means-tested benefits.
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