ProtectionJul 2 2015

Why are we planning for long-term care fees?

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Why are we planning for long-term care fees?

I was looking at the market-leading cash flow-planning software last week. Like many planners, I use spreadsheets, a fact find and my questioning skills. As the regulation and rules surrounding our industry changes weekly, it’s useful to have software that accommodates the latest pension minister’s rule modifications, usually implemented with little thought. What happened to white papers?

I digress. When looking at cash flow-planning tools, they all incorporate planning for care fees, covering that inevitable time in our clients’ lives when they will be wheeled from their homes, unable to care for themselves anymore.

We seem, as an industry, to just accept that this will happen. Poor physical and mental health will overcome us, our money will be taken and our homes sold to pay for the best care home our families can find for us. Pretty depressing stuff.

According to the Alzheimer’s Society, around 800,000 people in the UK have dementia, a staggering one in three people over 65 will develop dementia and two thirds of people with dementia are women.

These are frightening statistics; one in three people in the UK will lose their mental agility, understanding and the ability to think. Reading many financial advice websites and the media, this is all we have to look forward to: the unavoidable care home experience.

Dementia is not inescapable. According the NHS, eating a healthy diet, exercising, not drinking alcohol or smoking and making sure your blood pressure stays normal can all help to avoid the necessity of giving all your money and house away to pay for an expensive care-home.

So why do we just accept a long-term care need as a fact? Why are we telling clients it is inevitable and must be planned for in a cash flow? Would it not be better as part of the cash flow planning process to make clients aware that lifestyle changes (not diets) might help them avoid the mad house? Financial planning needs to include lifestyle planning based on the client’s current lifestyle choices and health. Why plan for a retirement age of 68 for an over-weight, 50-year-old male who drinks and smokes? Should we be more honest?

I would call on the Institute of Financial Planning as well as financial planners to start to include significant health and lifestyle information and drive home the facts to clients, that staying healthy, exercising and eating a varied diet is a far better plan that ensuring the cash flow graph allows for long-term care.

Richard Bishop is a lecturer in financial services at Coventry University College and a practising regulated financial adviser.