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18/03/19Retirees have care preferences, but only a fifth plan financially

The care we may need later in life isn’t something we often think about. But when prompted, most of those over the age of 55 have a clear idea about their preferences. Yet, a lack of financial planning could mean that those preferences aren’t possible.

Research conducted by Key unsurprisingly found that the majority (77%) of over-55s would prefer to receive care in their own home, either in their current home (57%) or in one deemed more manageable that they’d purchase in the future (20%). While receiving care in your own home allows you more freedom and is a cheaper option than a residential home, it does still come at a cost.

The cost of care in your own home can vary enormously. It’s a figure that’s influenced by a number of factors like your health and location. This type of care is often paid for on an hourly basis that seems small initially but can rapidly grow. Even if you require just two hours of support a day at £15 an hour, it’ll cost almost £11,000 annually. If it’s a cost you’ve not factored into your financial plan it could leave you struggling or having to cut back in later years or not receiving the level of support needed.

Despite the burden of paying for care often falling to the individual, the research found that just 20% of those over 55 have made financial provisions to pay for long-term care. When asked about funding care, more than a fifth (21%) stated they were concerned about how they would meet costs and a further 15% said they have ‘no idea’ how they would pay the necessary bill. Without forward planning, it may mean that you’re not able to secure the preferred type or level of care and make the process more stressful.

Planning for the unexpected

While you may have a clear idea about the type of care you’d prefer if needed, it’s important to plan for the unexpected. No one wants to think about the possibility of being unable to care for themselves. But if something should happen, what would be the solution? You may be able to rely on family and friends to some degree, however, in other cases, residential care may be necessary.

If you’ve only made plans with home care in mind, how would your finances be affected if further care were needed? Would you be able to pay for the cost of a nurse if it were required? Full-time care costs typically start at around £30,000 per annum, but if round the clock or specialist care is needed the figure can easily be much higher. Planning for potential care needs can provide peace of mind that future care will reflect your wishes and priorities.

Deciding what you’ll want to happen to the funds earmarked for care if not used is also important. Perhaps you would want it to form part of an inheritance, in which case potential Inheritance Tax liability should be considered. Alternatively, it could provide you with additional cash to fund your general lifestyle in later retirement if you’re still in good health.

Who pays for care?

There is often some confusion around when and how much individuals must pay for their care. Most people must at least partially fund their care costs as government help is means tested.

In England and Northern Ireland, if you have capital worth over £23,250, you’ll be responsible for paying care fees in full until capital is depleted below this point. For those with capital between £14,250 and £23,250, the local council will fund a portion of the total costs, but individuals will be responsible for paying the remainder. Your total capital will take into account a range of assets, including income, savings and the value of your property. As a result, it’s likely that you’ll be paying at least a portion of your care costs should you need support.

With this in mind, it’s prudent to create a financial plan as soon as possible, setting out how you’ll pay for potential care bills. It’ll help you organise your assets and understand the best way to access them should the need arise. It also means you can rest assured that future care needs will be taken care of, allowing you to enjoy your retirement years without concerns about future unexpected care bills.

If you’d like to ensure your financial plan considers potential care needs and your preferences, please contact us. We’re here to help you understand how your pension, savings and investments can be used to achieve your ideal retirement.

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Robert Terry t/a High Edge Financial Planning is an appointed representative of Sense Network Ltd which is authorised and regulated by the Financial Conduct Authority. Robert Terry is entered on the Financial Services register (www.fca.org.uk/register) under reference number 504561.

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