The cost of funding care and delivering support to the elderly has become a national priority. However, research suggests it’s still not something individuals are thinking about when they make retirement plans.
As average life expectancy has risen, the demand for care has soared and more people are living with complex needs. A report from Frank Knight shows the number of beds in care homes increased by 2,500 in 2020. However, the number is still falling in relative terms – there are now 28.7 care-home beds per 100 people over the age of 85, compared to 33.7 in 2010. By 2030, it’s estimated that there will be 2.1 million people over 85, and that demand will continue to outstrip supply.
While you can’t yet know if you will need some level of care later in life, the growing figures highlight why it’s important to consider the possibility.
And yet less than one in ten (7%) people consider planning or funding social care as a priority when retirement planning, according to a survey from Aegon. Just 1% said it was their single greatest financial priority.
Despite the majority overlooking social care when retiring, health is one of the biggest concerns for retirees. Almost half (48%) said they were worried about declining health. Within this, the need for assistance with basic activities and the need to move into a nursing home were among common retirement worries.
Why aren’t retirees thinking about care?
Investigating care options means confronting the possibility of your health declining over time. This is a difficult thing to do and some retirees may choose to bury their head in the sand.
Another reason for overlooking care when retirement planning is that 38% believe the cost will be covered by the NHS. While the NHS does provide some services to support the elderly, in many cases, retirees will need to fund care either partly or wholly, depending on their financial circumstances.
If you haven’t considered care as part of your retirement plan, here are three reasons to do it now.
1. Focus on enjoying your retirement
The above research indicates that deteriorating health and a need for care are worries for retirees. Taking control of this eventuality by making it part of your financial plan can help you focus on the things you enjoy in retirement.
Knowing that you have a care plan in place, should it be needed, will allow you to relax and feel confident in your future.
2. You will benefit from more choice
There isn’t just one type of care. Having the funds to pay for care yourself means you will have more choice.
If you needed some support, would you prefer a carer who came to your home several times a day, or to move into an assisted living facility? Your needs will affect what your options are but setting out your preferences can help build a plan that suits you. In some cases, you may hope to rely on the support of your family and friends, but it’s important to remember that circumstances can change.
Not only will planning for care give you more control over the type of care you choose, but the firms that deliver it. If you rely on your local authority or the NHS to pay for a care home, for example, it may not be in the location you want or offer the facilities that are important to you.
It’s also worth discussing your wishes with loved ones in case they need to make decisions on your behalf.
3. Safeguard the inheritance you want to leave to loved ones
If you’re required to pay for care, it can significantly deplete your savings and other assets, including your home. If leaving an inheritance for loved ones is a priority, planning for care can help safeguard what you’ll leave behind. If the total value of your assets exceed the below thresholds, you’ll need to pay for your own care.
- England and Northern Ireland: £23,250
- Scotland: £28,750
- Wales: £50,000.
Setting aside a fund to cover care, should it be required, can help you protect other assets you want to leave behind. It’s also important to consider what you’d like to happen to this fund should care not be needed; who would you like to benefit from it? Could it increase your Inheritance Tax liability?
If you’re nearing retirement or are already retired, thinking about care now can give you confidence in the future. Please call us to discuss how you can make planning for care part of your financial plan.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The Financial Conduct Authority does not regulate estate or tax planning.
Richard Fyfe is a Chartered Financial Planner and a Director of Fyfe Financial.