Younger UK adults (18-24-year-olds) are thinking more about saving for their elderly care than the over 55s, but there remains a big knowledge gap across all age groups, a study has found.
The research by law firm Irwin Mitchell Private Wealth asked over 2,100 adults living in the UK about their attitudes towards planning for later life, including care home fees, passing down wealth and inheritance.
It revealed that 60% of respondents were not currently saving for care home fees in later life and had no plans to do so – just 9% confirmed they had any sort of plan in place.
This is particularly concerning as 70% of the population admitted that they had no idea how much care home fees cost.
A divide was apparent among the generations when looking at those aged 18-24, where 54% were either saving already or planned to save specifically for elderly care fees in the future.
Some 67% of people aged 45-54 are not planning to save for care fees and 73% of over 55s said they were not planning to put anything aside for care fees.
Later life planning difficulties
“Later life and thinking about care costs are one of the most difficult aspects of financial planning,” Neil Jones, wealth and tax planning specialist at Canada Life, told International Adviser. “These findings suggest that many baby boomers are simply putting their heads in the sand while Millennials are more engaged.
“This could be down to the elderly thinking that the state will support them while younger generations are more aware or realistic about the level of support they are likely to receive due to rising costs.”
Alex Shaw, director at Progeny Wealth, told IA: “With many around retirement age often cash poor but asset rich, it is increasingly concerning that those most vulnerable to the cost of care fees are those least prepared.
“The findings that Millennials are outperforming their parents’ generation in terms of financial planning is interesting and perhaps indicative that with today’s property prices they have realised the need to prioritise securing their retirement costs through alternative methods of careful savings.”
Vicious cycle
Rachael Griffin, tax and financial planning expert at Quilter, also told IA: “Care costs are one of the biggest unknowns when it comes to planning for later life, more so now than ever as a question mark continues to hover around social care policy.
“The overwhelming lack of certainty is paralysing the UK public.
“With huge swathes of the population not planning their care, the onus will fall to either an already strained public system or their loved ones to pick up the pieces.
“While it’s encouraging that Millennials are already putting aside money for their own care, what we don’t want is a scenario where they have to pay out their hard-earned savings on the generation before them, who didn’t plan appropriately.
“Leaving a vicious cycle of the upcoming generations left to pick up the pieces of the ones before them.”
Not enough planning
A separate survey by pensions and investment firm Aegon found only three in ten (30%) of over 55s believe the importance of having enough money for care costs.
Aegon surveyed 650 UK adults with 277 respondents over 55s.
The research also found 39% of the age cohort said concerns over future care costs will hold them back from spending more in retirement.
Latest UK government figures show the average cost of staying in a residential care home in the UK, is £32,344 ($42,094, €37,400) per year and a typical hour rate for home care is around £20.
This means most people will need to use savings and assets to cover their care costs and may find these deplete very quickly.
The government announced it was to publish a Green Paper on a new approach to social care funding in its March 2017 Budget.
However, this has been repeatedly delayed. Social care funding did receive a mention in the Chancellor’s 2019 Spring Statement but only to say it will be considered as part of a summer spending review.
Crippling costs of formal care
Steven Cameron, pensions director at Aegon, said: “The cost of formal care can be immense, and retirees often face selling their house and rapidly depleting their lifetime savings to pay for this, extinguishing any plans to pass on an inheritance to future generations.
“What makes it worse is that until the government sets out clearly how much individuals will in future be expected to contribute, it’s almost impossible to plan ahead.
“Fear of being unable to pay their way means some are spending less than they can afford to, stopping them fully enjoying their earlier retirement years.
“The crippling cost of formal care has led many to rely on relatives and friends to provide valuable but unpaid informal care.”
