Personal PensionAug 13 2015

Cost of care exceeds average pension pot: LV

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Cost of care exceeds average pension pot: LV

Over the last decade the average length of stay in a care home has increased by 13 per cent from 829 days to 955 days – equating to two years and seven months – but figures from LV revealed that the average Brit reaches retirement without a pension large enough to cover this.

The government recently announced that it was delaying the implementation of the care cost cap by four years, meaning that it is currently unclear how much someone will have to put towards their care.

LV’s research, carried out in July among 4,003 UK adults, of which 814 have or have had one or both parents in care, showed that of those adults who have had a parent go into care, 38 per cent said their parents used savings to cover the cost of care, with 22 per cent saying their parents sold their home to pay the bills.

According to a new freedom of information data request by LV, in the past five years, more than 19,000 retirees have had a charge placed on their property by their local authority to meet the cost of their care. These charges are placed on the homes of individuals that do not have enough savings to cover their costs, but have enough equity in their property.

While local authorities cannot ask a retiree’s family to contribute towards the cost of their parent’s care, many UK adults do so.

While some adults contribute to ensure their parent can stay in their preferred care home, others help out in order to cover the basic costs of care. In fact, a quarter of adults with parents in care said that they are using their own money to help fund their parent’s care costs.

John Perks, managing director of LV retirement solutions, said that the UK is facing an uncertain future on the funding of long-term care, especially with the care cap being delayed.

“Although many of us leave the workplace in good health, as the average retirement now 17 years long, the likelihood of us needing residential or domiciliary care is increasing. In addition, we are also seeing a rise in the length of time being spent in care.”

He commented that low interest rates, coupled with social care budgets being cut, create a worrying financial backdrop for many, especially those already in retirement, as they are currently faced with an open ended bill which makes it difficult to plan effectively to fund these costs.

“We would encourage those individuals in and approaching retirement, to seek financial advice as to how they can make the most of their pension pots and potentially meet these costs.”

peter.walker@ft.com