Nobody likes to think of the prospect of requiring regular healthcare assistance in later life, yet the cost of care can be substantial if one has not prepared for it.
A Partnership poll of 10,782 people found 77 per cent of over-45s are yet to think about care or speak to their loved ones about it.
The figure is higher, at 80 per cent, for those aged between 65 and 75 years, while 64 per cent of those aged over 75 have yet to take this step.
Steve Lowe, group communications director at Just Retirement Partnership Group, said: “What triggers people to seek a deeper understanding of care fees is what goes on in their personal life. People aged between 45 and 50 are likely to start to see their parents struggle with their health. It becomes real for them then, and they will start thinking about it even more and will likely raise the topic with their adviser.”
The population in the UK is ageing and, for many, the improved life expectancy means they will have to arrange provisions for an extended period in which they require care.
According to the latest Office for National Statistics figures on health expectancies at birth and at age 65, published in 2014, women born between 2009 and 2011 are estimated to live 66 years in ‘good’ health – representing just over 80 per cent of their life expectancy.
For men, the figure is 64 years – representing 82 per cent of their life expectancy. This suggests that both sexes are likely to encounter health issues after the age of 65, on average.
Meanwhile, the percentage of people aged 65 per cent and over is forecast to rise from 17.7 per cent in 2014 to 24.3 per cent by 2039, according to 2016 ONS figures.
One of the most important decisions for individuals to make when considering the cost of care is whether they are able to receive help in their own home or would need to be moved into residential care.
The average cost of a being in a care home varies from area to area, but averages to £29,250 a year for residential costs, rising to more than £39,300 if nursing is required, according to healthcare specialist Laing & Buisson Care of Older People UK market report 2014/15.
Home care cost also varies, depending on location but also the level of care an individual requires. The Money Advice Service said individuals should allow an average of around £11,000 a year if they have a carer for 14 hours a week.
It adds that the cost for full-time day care starts at £30,000, but that figure can escalate to more that £150,000 if a helper needs to move in and provide round-the-clock assistance.
Justin King, chartered financial planner and registered life planner at Dorset-based MFP Wealth Management, said: “For the highly affluent clients the considerations are different. It is not an issue of money, but of personal preference. We had a case where a lady moved into a care home far too early, simply because she did not want to be by herself in her own home.”
The first port of call when it comes to retirement planning, according to Mr King, is to arrange lasting power of attorney for both financial as well as health and care decisions. Advisers should also establish if the client is entitled to benefits such as the Attendance Allowance, he added.
For Mr Lowe, exploring lifestyle changes that can be made to mitigate the likelihood of requiring care in the future should form a part of retirement planning.
Those who still have some way to go until they reach later life can also build capital via tax-efficient pensions and Isas.
For those who require immediate care, an immediate care annuity is a good option that pays a regular income towards a person’s care costs for the rest of their lives, Tish Hanifan, founder of The Society of Later Life Advisers, said.
Martin Bamford, managing director of Surrey-based Informed Choice, said: “People have historically sold their property to fund care, but doing this can cause huge problems when it comes to inheritance planning. We help our clients ring fence assets to go towards the likely cost of care and inheritance separately.”
Ms Hanifan said: “For people who want to receive care in the comfort of their own home, they may actually have to look at their home to provide capital for them to do so. I think equity release providers can be much more imaginative with their products."
The Care Act is widely recognised as the most significant shake-up in social care law in England for those aged over 60 years. It will introduce a cap on care costs to £72,000 for people aged 65 and over as well as for younger adults with disabilities.
The ceiling will not, however, cover the cost of board and lodging in the home, but the government is expected to fix the national figure for board and lodging at £12,000 a year.
At present, individuals with assets of more than £23,250 are illegible for financial support according to a sliding scale from local councils with their care cost, but this limit rises to £118,000 under the Act.
The Act was due to come into force by April 2016, but the government pushed back the date to April 2020, after local authorities wrote to the Department of Health asking for a delay because of the additional burden they faced following it.
However, the first phase of the legislation came into effect in April 2015, introducing measures including a national eligibility criteria for care and support – removing power from councils to set their own criteria – as well as a deferred payment agreement for care costs.
While the reform will be a boon to some people who are struggling to pay for care in later life, it is unlikely to bridge the gap between state provision and the cost to the individual according to Mr Bamford.
He said: “I am cynical about the decision to defer the reform. It indicates that the government does not want to address the cost of care and the challenges of an ageing society. It is becoming increasingly unaffordable for the NHS to meet the UK’s care needs so people will have to make further provisions for themselves.”
Mr Lowe said: “We will have another general election before then and whatever government elected in might choose to scrap the Act altogether.”
Myron Jobson is a features writer of Financial Adviser
Key Points
The population in the UK is ageing and, for many, the improved life expectancy means they will have to arrange provision for long-term care.
The first port of call when it comes to retirement planning is to arrange lasting power of attorney.
The Care Act is widely recognised as the most significant shake-up in social care law in England for over 60 years.
