Personal Pension  

Beware the long-term labyrinth of costs: report

A 55-page report from IFoA questioned the government’s proposed £72,000 cap on costs, which will only kick in once pensioners have paid out an estimated £140,000 long-term care.

The report warned that this could increase to around £250,000 if people are left in care for 10 years and means that only one in 10 individuals will reach the point at which they will receive state help.

The professional body for UK actuaries said there was less than an 8 per cent chance for males and 15 per cent for females of reaching the cap when it is introduced in April 2016.

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Thomas Kenny, one of the authors of the report, said: “Anyone who is expecting that the cap will pay for care is in for a shock. The cap is there to protect against catastrophic care costs and we estimate that few people entering care aged 85 years will reach it.”

The report also shows that a person in a care home or one with nursing will be expected to make an annual contribution of around £12,000 towards daily living costs, often referred to as “hotel costs”, which do not count towards the cap.

Janet Davies, managing director of Symponia, the network for care fee planning advisers, accused the government of using “circus tricks” and “a clever deployment of a smoke and mirrors tactics.”

She said: “Anyone bold enough to scratch below the surface would have seen that a person would have to have spent almost double the cap just to have eroded it in the first place – and that only applies to modestly priced care fees at around £500 a week.

“People in homes costing £1,000, far more common than people realise, will be spending over a quarter of a million pounds before their cap is used up.”

Ms Davies said that while she is grateful that the issue is now being discussed by actuaries, it has taken an “inordinate” amount of time for others within the government to catch up with what will happen after April 2016.

She added: “If anything people paying for their care after 2016 will be in more need than ever of sound care fees planning advice.”