According to a survey of almost 5,000 people carried out by the charity MHA in 2015, alongside health and wellbeing, and companionship or loneliness, one of the most significant concerns for people about the ageing process was personal finance – whether people would be able to afford a good retirement, including paying for care and support if they needed it.
Of course the definition of a ‘good retirement’ can be very personal, so asking a few searching questions of clients is a good place to start.
How would they actually define their own ‘good retirement’? How do they want to live at age 60, 70, 80 or 90? Do they envisage support from family as they age? Are there others they wish to provide for financially?
How long will I live?
No one knows how long anyone will live, but we do have life expectancy figures, which in the latest release of data has been shown to be unchanged in the UK at 79 and 83 years from birth for males and females respectively.
Within the headline life expectancy statistics are also figures of the proportion of life spent in ‘good health’, the converse of which demonstrates the proportion of life a person can, on average, expect to live in ‘not good health’ – which is 16.2 years for males and 19.2 years for females.
These figures alone provide a strong argument to why planning financially for care is so important.
What can go wrong?
If advisers find clients still require convincing of the need to plan ahead for care, it may be worth considering what might go wrong if they do not plan at all.
First, if people are unable to fund their own care then there may be state provision available – but potentially at the cost of personal choice. If a person can pay for it, they can choose who provides their care and where it is provided, but options are likely to be far more restricted if it is state-funded.
Some clients may wish to pass on some of their wealth to family, but be reluctant to in case they need it to fund care at a later date.
The inclination to pass on assets may grow as health deteriorates, but it is important for clients to be aware that passing on of assets immediately before care bills are due can be treated as deliberate deprivation of capital – in which case the local authority may seek to reclaim those assets in order to fund a person’s care bills.
Saving for care, and paying inheritance tax instead
