Consumer watch: Many will struggle to afford care costs for the elderly

ALMOST half of those expecting to fund care for relatives have not thought about how they will be able to pay for it, says Chris Marshall

WITH growing numbers of us living longer into old age, there are predictions that the average cost of long-term care for the elderly will rise significantly in the coming years.

A study by retirement specialist LV= this week estimated that the annual cost of care per person will jump from £26,000 to £33,000 in real terms by 2025, meaning the cost of long-term care for the elderly will rise to £38 billion across the UK as a whole.

However, the study found that almost half of those expecting to fund care for others had not thought about how they will pay for it.

While in the rest of the UK anyone with assets worth over £23,250 is not eligible for government support, the situation is different in Scotland, where free personal and nursing care is provided for those most at risk.

Earlier this year, however, there were warnings that means testing may have to be introduced to ease the massive costs associated with services such as free personal care and bus passes for the elderly.

The cost of services such as free personal and nursing care, prescriptions, eye tests and concessionary travel was almost £900 million in 2010/11, with Scotland’s pensioner population set to increase by 54 per cent between 2011 and 2031, while the number of people over the age of 85 set to increase by 114 per cent.

Vanessa Owen, LV=’s head of equity release said: “The UK is facing an uncertain future on the funding of long-term care. Low interest rates and living costs continually on the up, coupled with social care budgets being cut, creates a worrying financial backdrop for many, especially those in retirement.

“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.”

She added: “With our report highlighting that the cost of care looks set to increase by 27 per cent in real terms by 2025, 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.”

According to the report, almost one in five people in Britain are expecting to fund long-term care for an elderly relative, with around 23 per cent of us planning to use our homes to cover the costs.

The report shows that 52 per cent of those in formal care in the UK receive it in their home, while 48 per cent are cared for in a residential home. The split of those receiving residential and care at home is expected to remain consistent in the future.

Owen continued: “A large proportion of people believe using their property will be the only option they have to fund long-term care.

“If people are receiving care at home they can release the equity tied up in their property to cover the costs and remain living there, and those entering residential care can sell or rent their home. Equity release meets a clear need to help cover the cost of care in the home, and could be better utilised for care funding in our view. If people are considering using their property as part of their or a loved ones long-term care funding then it is important to speak to a specialist financial adviser.”

While nearly a quarter of adults expect an elderly relative to need long-term care in the future, one in four plans to look after them to avoid care costs.

Although around half of people have not thought about how they will pay for the care, those that have say either savings or their salary will be the main source of funding.

Meanwhile, 17 per cent of adults believe they will have to fund the cost of their care in the future. When asked how they would pay for it, nearly a quarter (23 per cent) said they would use their property, either through equity release, re-mortgaging or selling their home. A further 18 per cent said they would use savings, and 16 per cent would use their pension income.

One in seven (14 per cent) said they would rely on the state to cover their care costs, and a worried 12 per cent do not think they or their family would be able to afford any care and do not know how they will pay for it.

Callum Chomczuk, senior policy and parliamentary officer at Age Scotland, said: “Age Scotland recognises there is a need for those with larger assets to pay a greater proportion of costs than for those with low incomes and no assets, that is only fair.

“However, we believe the Scottish Government should increase the cap at which people stop receiving means-tested support. The Dilnot Commission on Social Care reform in England reported back last year, calling for the asset threshold for those in residential care beyond which no means-tested help is given should increase from £23,250 to £100,000. This would ensure that the care system takes into consideration the rising value of individual homes over the last 15-20 years.

“However, to protect people from extreme care costs we also back the commission’s recommendation to cap the lifetime contribution to adult social care costs that any individual needs to make at £35,000. Where an individual’s care costs exceed the cap, they would be eligible for full support from the state. This change should bring greater peace of mind and reduce anxiety, for both individuals and carers.”

He added: “The immediate term priority for the Scottish Government must be to shift the balance of care so that more older people are supported to live in their own home for as long as possible. This requires further investment in adaptations for the home, community transport, care and repair services, meals on wheels and other so called ‘low level’ services.”