Partnership’s Third Care Index reveals that with less than a year to go before the Care Bill starts to be introduced, 61% of over-45s admit they find the subject confusing and the largest proportion (49%) would turn to local authorities/social workers for guidance on this topic [Click here for full report].
Others would turn to the Citizens Advice Bureau (43%), use the internet (36%), speak to their family (33%), consult their doctor (31%) or look for help from a charity (21%). Just 13% would speak to a financial adviser (up from 8% in 2012) who are arguably the only people qualified to provide advice on financial products which can fund care.
With councils often the first port of call for information, 96% of over-45s said they expected them to provide clear information on their care options as well as guidance on their benefit entitlements. In addition, 96% said they would value ideas on local services which offered alternatives to residential care and 94% would expect information on local care homes as standard.
Over half (52%) also felt that referral to an independent financial adviser who could help them to structure their finances would be valuable. However, CF8 qualified advisers (i.e. those who have passed the CII exam to provide advice on care funding) estimate that just 28% of councils are referring people to advisers and only 44% of care homes are providing this service to their residents.
When asked what they would do following this referral, 40% of people said they would arrange a face to face meeting, 19% would speak to them over the phone and 24% said that it would prompt them to speak to their own adviser.
With consumers consistently underestimating the annual cost of care (anticipated – £27,203 vs. actual £28,600) and many still looking to the State for assistance, knowledge around care funding products is low. Currently, 82% have not heard of an immediate needs annuity the only financial product specifically designed to fund care, 53% are not aware of long-term savings bonds and 24% say that they do not know what equity release is.
Thomas Kenny, Head of Technical Pricing at Partnership comments:
“Almost three-quarters (72%) of people do not believe that they will need care during their lifetime so it is not surprising that they don’t know much about the products, have not spoken to their families and find the entire topic confusing. However, the fact remains that one in three women and one in four men who reach 65 will need care and they are likely to turn to their local council for help as some point.
“The typical care home costs £28,600 each year which is significantly above many over-65s’ annual income and a burden that they need qualified independent help to manage or they risk falling back on state support. Therefore, building these ties with specialist independent financial advisers is in the interest of councils as they prepare to work within the new framework of the Care Act.”
Consumers are also becoming increasingly convinced that they need to be more self-sufficient with property playing a key role.
Over a third (39%) of over-45s believe that those who can sell their homes to pay for care should and just 33% of people expect to rely on State funding if they go into care – the lowest proportion in three years. This is significantly lower than 2012 (51%) when more than half expected to rely on the state.
In addition, almost half (47%) said that the State should not be helping people who could meet this costs from their savings. However, they did recognise that not everyone could afford the average £28,600 annual cost and the vast majority (79%) said that the State should step in and pick up the bill for those who genuinely could not afford it.
When asked how they might fund their own care, property continued to play a significant role with 35% planning to sell their home and 11% suggesting they might rent it out. In addition, people said they would use their pension income (34%), their savings (29%) or income from savings and investments (16%).
Thomas Kenny, Head of Technical Pricing at Partnership comments:
“With a rapidly aging population and an estimated 150,000 entering care each year, taxpayers simply can’t afford to meet these costs for everyone. So it is good news for the country that people are increasingly expecting to meet some of the costs themselves and for others to do the same. This means that the State can focus on helping those who are most vulnerable and in need of state support.
“That said, £28,600 is a large amount of money for anyone to find – especially for those who are on a fixed income as many retirees are. Therefore, the choice to sell their home may well be the best one for their circumstances but we would advise anyone who is facing this choice to get specialist financial advice to help them to make the most of their assets.”
Residential care home costs are spiralling.
The annual cost of a room in a care home has increased by £299 on average over the past year: 54% more than the average £194 income gain enjoyed by pensioners over the same period, according to research by Prestige Nursing + Care.
The average cost of a single room in a residential care home in the UK has risen to £28,666 a year, more than double the average pensioner’s income of £13,993. It leaves older people facing an income shortfall of £282 per week or £14,673 annually should they need to pay for residential care.
The gap between care costs and incomes amounts to 104.9% of the average pensioner’s earnings after tax from pensions, benefits, work and investments. This is a slight improvement from 105.6% in 2013 and 107.5% in 2012 as pensioner incomes have grown at a faster rate than care home costs.
Even so, pensioners’ annual income gains still add up to just £785 over the last two years while care home costs have risen by £1,262. As a result, the gap between incomes and care home costs has risen by £9 a week or £477 a year compared with 2012.
Jonathan Bruce, Managing Director of Prestige Nursing + Care said:
“The fact that care home fees have grown at a slower rate than in previous years will be scant consolation for pensioners as the cost gap continues to widen in real terms. As council cuts drastically reduce eligibility for financial support in all but the most severe cases – with more cuts planned – many people are staring at a cavernous divide between their income in later life and the sums needed to pay for residential care.
“It is no surprise that older people often feel pressured into relying on family or selling their homes if the need for long term care becomes a reality. The widening gulf between costs and incomes threatens to place even more pressure on unpaid carers as pensioners struggle to make their incomes stretch to fund round-the-clock support.
“Care at home is often far more cost effective than residential care, allowing people to remain in the comfort of their own homes and use preventative measures to help maintain their independence. Promoting the role of domiciliary care is vital so that vulnerable people can access the support they need at a price they can afford.
“Of course, any form of care still comes at a cost and the issue of funding is further complicated by pension changes resulting from the Budget. There is a huge potential for confusion over how greater access to pension savings will impact on means-testing for care, and we need far more clarity to avoid leaving thousands of pensioners struggling to find the funds to pay for help.”
So how exactly is the ordinary pensioner in the street going to pay for his care without liquidating his assets and how will future generations who have been unable to get on the housing ladder? How will couples manage the costs of their care if both need to reside in care home due to ill health?