Baby boomers hampered by care cost worries

Baby boomers hampered by care cost worries

Concerns about care costs are holding back baby boomers from spending in retirement, new research has warned. 

Analysis by Aegon showed nearly four in 10 baby boomers had expressed concerns that future care costs would hold them back from spending more in retirement.

The data also found that three in 10 were now ensuring they have enough money for care costs, which is important for them.

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The research comes as the final members of the baby boomer generation turn 55 this year, which is the age that they can access their pension.

Steven Cameron, pensions director at Aegon, said: "The research shows that a large proportion of baby boomers are concerned about funding their future care costs, and with good reason.

"The cost of formal care can be immense and retirees often face selling their house and rapidly depleting their lifetime savings to pay for this, extinguishing any plans to pass on an inheritance to future generations.

"What makes it worse is that until the Government sets out clearly how much individuals will in future be expected to contribute, it’s almost impossible to plan ahead.

"Fear of being unable to ‘pay their way’ means some are spending less than they can afford to, stopping them fully enjoying their earlier retirement years."

Most individuals are required to pay for all care costs unless their assets and income fall below a threshold, which is currently between £23,250 and £28,000 depending on where they live in the UK, although different rules apply in Scotland. 

For those receiving residential care, assets include their home unless a qualifying relative, such as a spouse, is living there.

Latest figures show the average cost of staying in a residential care home in the UK is £32,344 per year and a typical hour rate for home care is around £20.

This means most people will need to use savings and assets to cover their care costs and may find these deplete very quickly.

The government announced it was to publish a Green Paper on a new approach to social care funding in its March 2017 Budget. 

But this has been repeatedly delayed. Social care funding did receive a mention in the Chancellor’s 2019 Spring Statement but only to say it will be considered as part of a comprehensive Summer spending review.

Mr Cameron added: "The crippling cost of formal care has led many to rely on relatives and friends to provide valuable but unpaid informal care.

"With more people living into their 90s and beyond, many baby boomers thinking ahead to their own care needs will have elderly parents to care for and may face having to opt to work part time or give up work entirely, which can have significant knock-on consequences for their own finances and retirement plans.

"Sadly, a new deal on social care funding has been one of the biggest casualties of a Government so absorbed by Brexit negotiations.