- Annual cost of long term care in UK expected to rise from £26,000 currently a year to £33,000 per person by 2025
- Longer life expectancy means a 37% increase in the number of people needing long term care in UK by 2025
- Almost one in five (17%) Brits are expecting to fund long term care for an elderly relative
- 11.5 million Brits (23%) would use their property to cover the cost of their own long term care
- 88% of Brits believe the Government needs to set a cap on how much people pay towards long term care
- On average, Brits think the long term care funding cap should be set at £14,000
The Future of Long Term Care report, launched today by retirement specialist LV=, shows as life expectancy in the UK increases, 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%.
In line with a rise in the number of Brits needing long term care, LV= predicts the average cost of long term care per person will rise by £7000 to £33,000 in real terms per year by 2025 , an increase of 27%. 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 . Cost increases would be even higher if the effects of inflation were taken into account.
What type of long term care are people in?
The Future of Long Term Care report shows that 52% (438,336) of those in formal care in the UK receive it in their home (domiciliary care), while 48% (401,848) 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.
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 just £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.
How will we fund long term care?
Whilst nearly a quarter of UK adults (24%) expect an elderly relative to need long term care in the future, one in four of these (7% of all adults) plan to look after their loved ones themselves to avoid paying for care. Worryingly almost half (46%) of those expecting to fund care for others have not thought about how they will pay for it. Those that have say their savings (22%) and salary (19%) will be the main source of funding.
Nearly one in five (17%) UK adults believe they will have to fund the cost of their own long term care in the future. When asked how they would fund their own care if needed, nearly a quarter (23%) said they would use their property to pay for care, either through equity release, re-mortgaging or selling their home. 18% said they would use savings, and 16% would use their pension income.
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.
Why are costs on the rise?
The biggest reasons behind the rising cost of long term care in the future are; women working later in life when they traditionally would have provided care; families increasingly living further apart lessening the option of care within the family; and most significantly, the rapidly increasing elderly population in the UK putting pressure on the infrastructure of care services and driving up cost .
Vanessa Owen, LV= 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. With our report highlighting that the cost of care looks set to increase by 27% 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.
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 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. On average, people thought the cap should be set at £14,000, much lower than the cap recommended in the Dilnot report.
Almost a third (31%) believe the Government should fund the total cost of people’s long term care. The Government is due to formally respond to the Dilnot report in the coming weeks.
Vanessa Owen continued: “The average wealth of those over 55 is above the current limit for state funding of £23,250 meaning the cost of long term care will need to be paid for out of their own pockets under the current rules. With the average cost per person of long term care set to hit £33,000 per year by 2025, it won’t be long before personal funds run dry. 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.
“A large proportion of people believe using their property will be the only option they have to fund long term care. If people are in 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.”