IFAs told to focus on clients' care needs

IFAs told to focus on clients' care needs

Advisers are being urged to ensure their clients are financially prepared for the need for long-term care, as research showed more than two thirds of over 75s have never thought about such needs.

According to official data from the government, about a quarter of the population will need long-term care in later life.

On average, this is set to cost between £40,000 and £70,000 per year and many consumers are not aware of how this is funded or the levels of help they will receive from the government.

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The latest Care Reform report from Just, out earlier this year, showed that 93 per cent of over 55s had made no provisions for the possible need for long-term care.

About half of those over 45 (47 per cent) did not know that anyone with more than £23,250 in savings and investments wouldn’t receive financial help from a local authority, while a similar number (51 per cent) were delaying making financial plans and seemed happy to “avoid the problem”.

Matt Dickens, senior business development director at asset manager at Ingenious, said there was a planning gap and a “big opportunity that needs filling” with “sound financial provision and clear independent advice”.

Mr Dickens pointed out that consumers who use the services of a financial adviser would be “very unlikely” to get assistance from their local authority as it is likely they would fail the means test and would therefore need a buffer of about £50,000 per annum on average to fund their care needs.

He said: “If a consumer doesn’t have a guaranteed passive income from investments, state pension or private savings that match that level of fees, the consumer can be considered to have a ‘pre-care fees planning shortfall’.”

A green paper from the government — set to outline the future provisions of caring for an ageing population and an increased need for long-term care — is expected to be published in the coming months.

This paper has now been delayed six times, and Just’s care report showed more than half (51 per cent) of consumers think the issue has been neglected due to Brexit.

Mr Dickens thought the lack of government certainty and the wide-ranging consumer apathy on the topic meant financial advisers had to step up to ensure their clients had the money to fund any later-life care costs that could come their way.

He said: “There is also a lot of confusion about the provision of care and how it is paid for, with most people avoiding doing something as they don’t know what to do. 

“State provision is very restricted and services are tightly controlled — and no organisation is suggesting the environment is going to improve and indeed most say it is going to get worse.”

According to Mr Dickens, Ingenious has developed an enterprise investment scheme to work as an investment vehicle dedicated to providing long-term care funding.

He said: “It has the benefit of allowing clients to grow their investment in a modest but relatively predictable way, and should they live for two years beyond the point of investment, means that any remaining funds left in the investment after their death should be fully inheritance tax exempt.”