According to American writer Helen Gurley Brown, “After you’re older, two things are possibly more important than any others: health and money.”
In most cases, people enter retirement with a sense of relief and optimism. No longer part of the daily working grind and able to spend each day as they please or ticking off items from that bucket list. However, a relaxing retirement is not afforded to everyone and problems are most commonly related to either health or money.
Money is the easier of the two to tackle. Although saving is not easy for everyone, with the correct long-term planning, many can live a financially secure retirement. Health is a completely different animal. Anyone of sound mind would prefer to control health over money. But the real concern is to ensure that poor health that subsequently requires care, does not lead to poor wealth.
Long-term care (LTC) planning has been a recurring issue with consumers, with many taking the hard stance that saving is pointless, as means-testing results in accumulated wealth being used to fund care, while foolhardy non-savers are provided similar care for free. This imbalance can produce a complicated and difficult objection for advisers to overturn as consumers juggle the irritation of financial injustice with the fear of retirement hardship. It is a clear bugbear for many that the fruits of prudent investment can be swallowed by care fees instead of being passed on to future generations.
People are living longer and future expectations suggest this trend is set to continue. Data produced by the Office of National Statistics (ONS) in December 2015, suggest that those born in the year 2050 will expect to live to their late 90s (see Chart 1) – but in what state of health?
Living longer does not necessarily equate to living healthier, and many could find themselves funding care costs for many years. Increased life expectancy could potentially become very expensive.
Means-testing has created ill-will towards current and previous governments, with many opposed to the idea that, in some instances, the family home should be sold in order to fund necessary care in later life. In some cases, even the sale of the home would not provide sufficient capital or income to meet care costs, especially if required over many years.
Pension freedoms were largely welcomed by the public, which has long been vocal about the need to relax the rules on how pension benefits are drawn. The negative impact has been that pension funds may now come under scrutiny by the government when means-testing assets for long-term social care.
