One in three over-55s (38%) openly accept they could not afford to pay for long term care. And while almost one in four (24%) expect their retirement income would cover most or all of the associated costs, it appears in reality they fail to appreciate the full financial impact.
Over-55s estimate the average cost of long-term residential care to be £16,027 per year. In truth the average yearly bill is £12,340 (77%) higher at £28,367. This sum far outweighs the average annual income of £18,132 among over-55s: demonstrating that the costs of care are not just higher than most people think, but also higher than they can afford.
A clear majority of over-55s (85%) have made no plan at all for the financial implications of needing long term care, with almost half (46%) – including 37% of people in their 70s – having avoided thinking about the subject entirely.
Nearly one in five over-55s (19%) would consider selling their home to pay for care bills, with more than half (57%) recognising their home as their biggest financial asset in later life.
Yet given the choice, most (85%) would prefer to receive necessary care in the comfort of their own homes.
Nigel Waterson, chairman of the Equity Release Council, said: “The UK faces a mounting bill for care costs in later life as people live longer, but despite people’s concerns there are a range of choices open to over-55s.
When emotions are likely to be running high, it is vitally important that people receive expert advice from regulated professionals to properly assess their options and the impact of any decision.
Prudent planning can allow them to find ways of meeting their care needs without giving up their home.
“Regulated advice is invaluable not just for the peace of mind it brings, but because it enables fully informed decisions that lessen the chance of unexpected consequences.
That is why The Council and its members ensure that anyone considering equity release receives both regulated advice and independent legal guidance in person while they assess the benefits of taking out a loan. It’s also why regulated advice should be a minimum requirement in the new Care Bill for anyone needing to fund long term care.
“The vast reserves of housing wealth held by over-55s in the UK can ease many otherwise challenging situations, and more people are already taking steps to use their property wealth to raise their living standards in later life.
“As we adjust to a population that is living longer and encountering new health challenges, advisers will be increasingly called on to include equity release in the holistic range of products they consider to support retirees.”
The Council’s research also suggests the average over-55’s property is worth £230,862, opening up the potential to access an average of £61,178 through an equity release plan.
This extra income could meet the cost of more than six years of domiciliary care, for example, by paying for domestic support and home modifications which can delay or remove the need to go into full-time care.
The government’s draft Care Bill currently makes no stipulation that individuals in need of long term care must be directed towards regulated financial advice by their local council.
Yet advisers are the most popular source of guidance among over-55s when it comes to making big financial decisions – although the internet is an increasingly important resource for the youngest among this group.
Two in five over-55s (40%) go to a financial adviser when facing an important decision, with those aged 75-79 the most likely to do so (46%).
However, the internet is a close second: 39% of all over-55s include this in their research process, including 46% between the ages of 55 and 64.
Almost one in four over-55s (22%) include family members in the process while the same number look to the media for information (22%).
Getting regulated advice is clearly valued by the over-55s, however, as 78% of over-55s would be unhappy to take out a pension without taking this step. A quarter (75%) would not invest in property without professional, regulated advice; 73% would not take out a mortgage; and 62% would not purchase life or health insurance.
