Ensure you can care with money spare

A SURGE in post-Covid sickness has meant a dramatic rise in care needs.

Half a million more women started caring for a loved one in 2021 when we began to emerge from the pandemic – and 200,000 more men. It means there are almost five million informal carers in the UK.

When we think about the cost of care, we tend to think about the price tag for things like paying carers to come in for a few hours a day, or the nightmare costs of needing to go into a nursing home.

However, if we informally care for a loved one, it comes with a hefty price tag too.

Managing work alongside care can be incredibly difficult and, as a result, an awful lot of carers are forced to drop out of work.

Data from financial services firm Hargreaves Lansdown shows only a third of carers work full time and just half work at all. Juggling care with work is even more difficult for the one in eight who are sandwich caring – looking after both older family members and their own children.

“If, for example, you switched from working full time to working part time for five years, someone on an average salary could miss out on £55,000 in lost income,” says Sarah Coles, head of personal finance at Hargreaves Lansdown.

“If you had to give up work for five years, you could miss out on around £150,000. And it’s not just the lost salary while you’re away you need to consider. You could also miss out on opportunities at work that set your earning potential back years.

“If you need to care long term, it will have an even bigger impact. Working part time from the age of 50 can cost over £186,000 in lost earnings, whereas if you have to give up work at that age it’ll cost almost £500,000.”

This not only causes enormous problems for your finances while you’re caring, but it results in smaller pension pots too.

The most common age to become a carer is between 55 and 64, and often these are the years when children have flown the nest and we have the income to focus on our own needs – particularly on boosting pension contributions.

If we’re forced to scale back work, or stop altogether, we can miss these years entirely. It can leave us worse off for the rest of our lives.

The Pensions Policy Institute counted the cost for carers when it came to pension savings. The average annual private pension income in the UK is £7,750, and the average for carers is £5,600.

The cost is just one of a huge number of considerations when you’re weighing up how to help a loved one.

There will be people who want to provide care, regardless of what it costs them personally, but there will be others terrified of the cost of a care home who hadn’t considered the price they would pay doing it themselves. Sarah adds: “The best way to give yourself flexibility to find the solution that works best for your family, is to plan ahead. Consider the possibility that we’ll need to care for someone we love when we’re older, and how we’ll pay for it. The earlier we plan, the better. It might mean prioritising your pension earlier, or putting more into savings, so you have something to fall back on.”

Ideally we should plan for our own care too. If we can afford to pay for professional care, we can reduce the impact on the lives of our loved ones. It can be difficult to build a specific pot of money for this.

However, it can make sense to ringfence some of any defined contribution pension for care needs. If you don’t end up needing it, you can pass it on to family free of inheritance tax, so they’ll benefit from your plans whatever happens.

‘‘ We should plan for own care too, and if we can afford to pay professionals