Care crisis destroys family finances
Filed under: Retirement
So what can you do?
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Give up workIn a new report, Carers UK argues that council cuts mean that growing numbers of family members are being forced to give up work to care for ill or disabled loved ones - because they are unable to get the reliable or affordable support to juggle work and care. It found that 31% of working age carers gave up work to care or reduced their working hours because local care services were unsuitable.
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The cost to these families depends on their salary and just how much care is required, but could potentially add up to tens of thousands of pounds a year. Meanwhile, figures from the LSE estimated the public expenditure cost of families quitting their jobs to care is a staggering £1.3 billion a year in carers' benefits and lost tax revenues.
Pay for careThere are lots of people who are unable to care for their relatives, who may live at a distance, or be unable to meet their needs. Worryingly, in such cases, care is increasingly unaffordable. A separate study by LV= found that the annual cost of long term care in UK expected to rise from £26,000 a year to £33,000 per person by 2025. This puts the total cost of long term care for the elderly in the UK at £37.9 billion a year by 2025, compared to £21.8 billion now.
What can you do?Turning a blind eye and hoping for the best is not a viable option. The LV= figures showed that longer life expectancy means a 37% increase in the number of people needing long term care in UK by 2025, and that almost one in five (17%) Brits are expecting to fund long term care for an elderly relative. The number of people that will need to make use of formal long term care services will grow from 840,184 today to 1.1 million by 2025, an increase of 37%.
Hoping the government will step in seems hopeless too. For residential services in nursing and care homes, currently those with assets worth over £23,250 are not eligible for Government support. LV='s new report shows the average wealth, including assets such as investments, savings, property after mortgage, of those over age 55 in the UK is £32,500 indicating that under the current rules many would have to fund the entire cost of care themselves with no help from the state
Your optionsIt is essential, therefore, to consider how you will deal with care needs when they arise. Worryingly almost half (46%) of those expecting to fund care for others have not thought about how they will pay for it. One in seven (14%) said they would rely on the state to cover their care costs, and a worried 12% do not think they or their family would be able to afford any care and do not know how they will pay for it.
It appears as if property is the most common solution, as 23% of us would use our property to cover the cost of our own long term care either through equity release, re-mortgaging or selling our home. Meanwhile 22% will eat into savings and 19% will pay it out of income.
One in four plan to care for an elderly relative themselves, but it is essential to consider not just how they will fit into your home and your life, but whether you will be able to cope when their care needs become critical.
All of these solutions have merit, and in most cases will make long term care a possibility. However, they will all have an impact. Whether you face using up your life savings, living on a restricted budget throughout your fifties and sixties to pay for elder care or selling the family home, it's worth thinking through the cost of care, the impact on your life, and the solution that best works for you.
Vanessa Owen, LV= Head of Equity Release said: "It is a real concern for people who have the burden of long term care costs approaching, as currently they could be faced with an open ended bill which makes it difficult to plan effectively to meet these costs. People need to make sure they have thought about the possibility of paying for care, either for themselves or loved ones, and how it would be funded."
The governmentThere is some hope on the horizon. The recent report from Andrew Dilnot, reviewing the funding system for long term care in England, suggests that a cap on the amount people pay towards the cost of their care be set at around £35,000, and recommends only those with assets worth over £100,000 should pay for the full cost of their care. The Government is due to formally respond to the Dilnot report in the coming weeks, which may ease some of the burden on relatives.
The report from LV= reveals 88% of Brits agree there should be a cap introduced on the funding of long term care, and 22% of this group think it should be dependent on people's wealth and not set at the same level for everyone.
Owen concludes: "The Government needs to address the Dilnot report, and introduce some sort of cap to ensure that people can properly plan for the possibility of paying for care, and that people's total wealth isn't quickly eroded."