It’s good to spread good cheer at this time of the year, and one thing to celebrate is the fact that we are all living longer. Improvements in health care have meant life expectancy has gone above the age of 80 for those who are nearing retirement now.
A proportion of those who retire now could reasonably expect to be collecting their state pension for 30 years. In fact, the Office for National Statistics recently forecast that one in every four people will be aged 65 and over in less than two decades. That’s up from around one in five in now.
But we may not be in the peak of health for all those extra years, and we may need to pay for care as well as everyday living. Last month, figures from the Ministry of Housing Communities and Local Government revealed councils are now spending more than £16bn a year on adult social care. The House of Lords has reported that the system is struggling to cope with the burden of an aging population and would need £8bn to simply restore services to 2010 levels.
If you are planning on living to a ripe old age, you may prefer not to have to leave your care to the tender mercies of the local authority; but private care is expensive. Figures from Fidelity suggest that caring for an elderly relative cost an average of £5,545 a year. That’s just the typical financial impact on an adult for looking after a vulnerable adult on an informal basis – either in care costs or in lost earnings. Almost a third of all UK adults look after elderly relatives, a fifth have taken time out of work and more than one in 10 have cut their hours and a similar number have had to quit their job altogether
It is a sizable financial penalty – but only a fraction of what can be expected if a place in a residential care home is required.
Living in a private care home can cost £1,000 a week or more. If you don’t have the funds, you might find yourself in council facilities.
These figures are sobering, and state funding is already stretched to breaking point. If you are going to enjoy a comfortable as well as a long old age, you need to ensure you have the funds in place to provide it.
Will the state help?
The local authority will help pay towards care, but benefits are means tested, and your home may count towards your assets unless your spouse or partner still lives there. This means that the council will want you to sell it to pay for your care.
As part of the reforms the government is setting up a universal deferred payments scheme, which will mean that people do not have to sell their homes in their lifetime to pay for residential care. However, its value is counted as part of your resources. You don’t have to sell it, but when you die, your property will be sold, and the bill paid.
Local authorities have become very wary of attempts to avoid ways of handing over the family home.
It looks as though the solution is to ensure that you have sufficient funds saved to pay for your care.
How can you prepare?
There are ways to provide a large cash sum which could let you live out your natural span in comfort. The important things are to start planning as early as possible – and working with your expert Continuum adviser to understand exactly how much you need to put away, and the best way to build the cash lump sum you might need for a comfortable old age. Considerations could be for example: making the most of your pension plans or setting up an ISA to provide a tax efficient cash lump sum – but there could well be other solutions to consider, and getting advice about your particular circumstances may be essential.
Talk to us now at Continuum about the best way to ensure you have the cash you need for future care.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
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