The latest Real Retirement Report from Aviva found that whilst most people are worried, concerned or terrified about meeting care costs, very few have made any formal provision.

Of those over-55s who believe they should have to pay for care in retirement, they say that an average of £3,610 is a fair cost for a lifetime of care.

Looking at suggested funding strategies for care in later life, the Real Retirement Report found the most popular option was for the “better off” to contribute to their own cost of care, with the Government paying for everyone else. 51% of respondents felt this was the best option.

Meeting the cost of long term care continues to be a very difficult subject, despite the government initiated review by Andrew Dilnot concluding that social care costs in England should be capped at £35,000.

Under the current rules, those with assets over £23,250 are expected to fully fund the cost of care.

The Local Authority only picks up the tab when assets, including the value of property in some cases, falls below this threshold.

The independent Dilnot report argued for this threshold to rise from £23,250 to £100,000. Doing this would result in fewer people having to fund their own care fees.

Despite these proposals, planning for the cost of care remains a challenging and specialist advice area.

Those needing care should spend some time talking to a suitably qualified and experienced independent financial adviser to ensure they understand the various issues and their options for meeting these costs.

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The figures from Partnership are based on a four year stay in a residential care home under the new rules proposed by the Dilnot Commission.

There remains such a substantial cost because the Dilnot proposals cover funding for the cost of care, not the cost of accommodation.

Partnership point out that accommodation fees can be two to three times the combined cost of personal and nursing care fees.

Four years is the average life expectancy of an immediate care annuity customer with Partnership.

If they had care costs of £1,000 per week, they would pay £208,000 over a four year period. The new system proposed by Dilnot would result in them still paying £189,000 over four years.

As we recently commented to one of the trade publications, there is a real danger that the Dilnot proposals will lull people seeking care into a false sense of security over total costs.

There is a misconception that, once you have paid the first £35,000 of social care costs under the proposed Dilnot structure, the rest of your care costs will be covered by government.

In reality, the government will not pick up the tab for hotel costs or general living costs. As a result, each year spent in a residential care home could continue to cost £40,000 to £50,000, depending on the area of the country and care home selected.

Assuming the Dilnot Commission proposals are accepted by government, they will still take some time to implement – maybe as long as five years.

The need for professional independent financial advice on care fees planning has never been greater.

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Under the current rules, those with assets over £23,250 are expected to fully fund the cost of care.

The Local Authority only picks up the tab when assets, including the value of property in some cases, falls below this threshold.

The independent Dilnot report argues for this threshold to rise from £23,250 to £100,000. Doing this would result in fewer people having to fund their own care fees.

He also recommends a lifetime cap on the cost of care fees at £35,000. This is a level he believes would be “fair” and would mean people were not faced with the prospect of losing all of their assets in later life.

To put this figure into context, around 1 in 10 people currently face lifetime care costs in excess of £100,000.

The proposed system would result in the person needing care being liable for the first tranche of costs.

Whilst these are sensible recommendations which will be hard for the government to ignore, the largest barrier to their introduction will be cost.

Making these changes to the adult social care system in England would cost the government in the region of £1.7bn a year if they were implemented now.

As a result of the ageing population, this cost could rise by as much as 50% when the baby boomer generation starts to retire.

It is unlikely that these proposed changes will happen any time soon.

Even if the government were to embrace the recommendations immediately, it could take as long as five years for these changes to be fully implemented.

In the meantime, funding care fees remains incredibly expensive and often the only option is to sell the family home to meet this expense.

We find that many people who need care in later life do not want to rely on the Local Authority to decide on the location and standard of their care home. Instead, they and their families prefer to be in control of these important decisions.

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The report, “Care in Crisis: Causes and Solutions”, shows that care and support for older people in England has reached a breaking point.

800,000 people in need of care currently receive no formal support from either the state or private sector agencies.

Age UK predicts that this figure could rise to one million within four years, due to government spending cuts.

By 2014, England will spend £250 million less (in real terms) on care for older people compared to a decade ago. At the same time, the number of people over age 85 has risen by 630,000.

There is little doubt that the care system in England is in a tough position.

An ageing population combined with less money to spend on social care means that older people are increasingly having to fund their own care in later life.

This often means selling a home followed by difficult decisions about the best way to structure assets to ensure that money does not run out.

The Age UK report contains some important statistics which highlight the state of social care in England.

Back in 2005/06, half of councils provided support to people assessed as having ‘moderate’ needs, but in 2011/12 the figure has fallen to 15%.

This means that the number of people receiving local authority funded care at home has been slashed from 489,000 in 2004/05, to 299,000 in 2009/10.

We look forward to seeing the government response to this new research.

For people needing care now, we suspect that it will be years before the English social care system is sufficiently repaired through new policies and government initiatives.

Photo credit: Flickr/Jim Linwood

In the last twelve months, the number of individuals denied local authority funding has risen by about 80,000.

Recent reports show that over 21,000 pensioners were forced to sell their homes to fund their care fees between April 2009 and March 2010.

The Care Quality Commission has also reported that the number of hospital beds in geriatric wards has also fallen by about 15% in the last five years and that the standard of health and social care is sadly lacking despite the increase in the elderly population.

Pensioners who have worked hard all their lives and who are funding their own care fees are now subsidising those who are being funded by the local authority.

This is a particular problem in the South of England where privately funded residents are paying in the region of £775 per week and local authorities will pay between £268 and £594 per week, dependant on the care they require.

This means that those funding their own care could in effect pay £10,000 a year more than those funded by the local authority. There are concerns that because of the lack of public funding this disparity will continue to grow.

Southern Cross Healthcare, one of the major care providers, is in talks with the government as it faces financial difficulties as local authorities are cutting back and councils are refusing to pay fair and economic rates.

Care homes are calling for the Care Quality Commission, the industry regulator to intervene.

Funding the cost of long term care in older age is often one of the most important financial decisions people have to make. It it important to seek expert and impartial advice to ensure you consider all of the options for care fees planning, including the use of care fees annuities and properly managed investment portfolios.

You can find out more about our expertise in the specialist area of care fees planning on our micro-site at www.mycarefeesadviser.co.uk.

Do let me know if you have any questions on this important subject. You can find out more about me and the services I offer at www.sandy-lowth.co.uk.

The government is effectively reducing the level of savings that can be disregarded when looking at the care home fee means test by simply freezing the level at its current rate for the next two years.

They have no plans to review these limits until the autumn of 2012.

Inevitably, in the interim, this means more people will be dragged over the means test threshold and therefore having to self fund from whatever means they have.

Currently an individual owning reckonable assets above the £23,250 upper threshold (in England) will be forced to self fund until their assets fall below this level.

Traditionally this threshold has been increased annually to take into account inflation but the government has decided to hold ditch this approach as part of their austerity measures.

The real effect of this action is an effective cut to the threshold by up to 10%.

Around 100,000 people already receiving some form of care fund themselves and it is estimated that 20,000 sell their homes in order to do so. In view of this additional “cut” it is likely that even more will need to sell up in the future.

Another states that “baby boomer wealth must fund their old age care”.

Lord Warner, who is a member of a commission drafting plans to reform provision for the elderly and disabled, believes that the post war baby boomer generation should fund their care by using the wealth they have accumulated in their properties.

The Health Secretary has already concluded that there is no simple answer to this problem.

Tax payers and family members will almost certainly have to share the burden into the future as the ageing population increases.

Lord Warner admits that there should always be a safety net of state funding for the poorest pensioners but that insurance companies need to look at developing more creative products to address this issue.

Equity release schemes are still unpopular solutions and Lord Warner has urged the financial services industry to find ways of planning for the future and allowing people to protect their assets and at the same time provide funds for long term care.

Nick Starling from the Association of British Insurers (ABI) believes that a partnership system would be beneficial, where the government pays a sum of money towards care costs and individuals plan ahead for the future contribution that they will be expected to make.

A final comment from Lord Warner; “any fantasy about one hundred per cent universal state provision…forget it”.

Do speak to us if you are concerned about planning for the cost of care fees in later life.

In the 34-54 age group, 44% of people say that having to sell their home is inevitable should they need domiciliary or residential care in later life.

38% of those aged over 55 will need to sell their homes should they require care.

Around 20,000 pensioners are forced to sell their homes each year to fund care costs.

Please visit our dedicated care fees planning website at www.mycarefeesadviser.co.uk for more information about the cost of care and to download a free copy of our guide to care fees planning.

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The White Paper, called “A Vision for Adult Social Care: Capable Communities and Active Citizens” is set to describe how the provision of social care services will be increasingly removed from local authorities and given to those actually receiving care.

This forms part of the Government’s ‘Big Society’ agenda and will set the challenge for local authorities to provide those who are eligible with a personal budget for care services by April 2013.

This personal budget will preferably be a direct payment.

Whilst the personalisation of care budgets is likely to be welcomed, it could create problems with elderly people having to manage their own budgets and directly employing those providing care services.

If this is the case, the role of the specialist care fees planner will become even more important, helping those receiving care (and their representatives) to manage financial resources and get best value for money.

Photo credit: Flickr.com Jim Linwood

This means that an average of 60 homes are being sold a day to meet the cost of long-term care.

Since 2005, the number of people being forced to sell their property as a result of care fees costs has risen by 17%.

As the population in the UK continues to age, this trend is likely to continue, with more elderly people needing to sell their homes to fund the cost of care.

One interesting figure from the Daily Mail report related to the level of care fees inflation.

Over the past five years, the cost of care fees have escalated by more than 20%. They now stand at an average of £25,896 a year, although care fees can be significantly more expensive in some areas, particularly in London and Surrey.

As the rules currently stand in England, individuals with total assets exceeding £23,250 are expected to fully fund the cost of their own care. This asset limit includes property, with some exceptions.

A local authority will disregard the value of your property in certain circumstances where someone else lives there. Some examples include your spouse or partner, a relative over the age of 60 or who is disabled, where a minor (under the age of 16) who is dependent on you lives there or where a carer who has given up their own home to provide care lives in your home.

You can download a free copy of our guide to care fees planning here. Do contact us if you would like to speak to one of our specialist care fees planning advisers.

Photo courtesy of blech​.