Easing the pressure of rising care costs
NO MATTER how carefully we plan our finances, many of us will face a massive challenge at the end of our lives as we wonder how to pay for care costs.the NHS will take care of most illnesses, but the state will not foot the bill for adult social care.
In practice, people have to pay for themselves, or call on loved ones to help out. Lives are put on hold and inheritances depleted as a result.
The Government has repeatedly failed to tackle the crisis in social care funding and the pandemic has caused further delays. Families have effectively been left to their own devices. So what can you do?
START TALKING
The first step is to talk to your loved ones, but many are reluctant. Six out of 10 members of the “sandwich generation”, those in their 40s and 50s with young children and elderly parents to look after, have never discussed care costs with their parents. Many fail to realise what is at stake, with only a third considering that the burden may fall on their shoulders, according to new research from wealth adviser Killik & Co.
Killik’s head of wealth planning Svenja Keller said just one in 20 are financially prepared: “Conversations around long-term care can be difficult but making plans can bring peace of mind.” Starting the conversation is the hardest part and she suggested using a specialist financial adviser.
BIG SQUEEZE
Deputy headteacher John Dovey is used to having difficult conversations with parents and pupils but talking to his own parents about care is a different matter: “They are both healthy and active so it doesn’t seem pressing – but mainly, it would feel awkward.”
John, 40, from Halesowen in the West Midlands, said the money side is the hardest of all to discuss: “It would feel awkward and possibly emotional for all of us. I would rather not have it.”
As a working father with young children, he says taking on caring duties or costs would be a challenge: “My children will be dependent on us for university costs for at least 20 more years to come.”
Like millions in the “squeezed middle”, John is crossing his fingers and hoping for the best.
TAXING ISSUE
The Conservatives have repeatedly postponed social care fund reforms, after being shaken by the outraged response to former PM Theresa May’s notorious “dementia tax” proposals in the 2017 general election.
This stated that people would pay care costs until the value of their assets – including their home – fell to £100,000.This is actually more generous than today, as local authorities will only step in after assets fall to £23,250 in England.
The Government’s plans to seek a cross-party consensus on social care funding reform were derailed by the pandemic.action has been promised this year... but don’t hold your breath.
POSTCODE LOTTERY
Private residential care is expensive, costing a thumping £848 a week on average, or £44,096 a year, according to Legal & General Retail Retirement.as a result, one in four care home residents will run out of money at some point.
It is also a postcode lottery, with costs peaking at £1,488 in Islington, London, but falling to £621 in Blaenau Gwent,wales, a difference of more than £800 a week.
Some 1.3 million older people request care each year but only around 700,000 get it and demand will rise as the population ages.
L&G runs a Care Concierge
Service to help customers source help and Dr Sam Roberts, managing director of health and care, said: “People need more information so they can plan ahead and anticipate how much to set aside.”
RAISE FUNDS
More than four million have had to sell a relative’s home to pay for care needs, according to research from the Equity Release Council.
Among the over-50s, six in 10 fear having to move into residential care homes, which is understandable given the loss of independence and potential financial damage.
Chairman David Burrowes has urged the Government to make state-funded care available to all, up to a point, with people topping this up from their own funds and assets.
He said equity release can help people unlock the spare equity in their homes without selling: “This could fund extra home-care services, new technologies or home adaptations, allowing them to live independently for longer.”
‘Conversations
around long-term care can be difficult
but making plans can bring peace of mind’
GOVERNMENT DIRECTION
There is no easy answer. Long-term care insurance plans proved a flop, as people were reluctant to commit to paying years of premiums for care they might never need.
Another option is an immediate care annuity, which pays a regular income to cover care costs, in exchange for an upfront lump sum costing tens of thousands of pounds.
Ideally, people would be able to fund costs from their own pension income and savings, but few can.
People need clear direction from the Government, although financial help will be limited as the pandemic squeezes the public purse.
Talking to your family won’t solve the dilemma. It is a start though.