How much does residential care cost?
As Financial Planners with a specialism in care fees planning, we often talk about the cost of residential care in later life.
This can be incredibly expensive, especially here in the South East of England where typical fees can quickly deplete life savings.
But the total cost of residential care of course depends on the length of the stay in a care home.
Some new research from provider LV= has found that, over the course of the last decade, the average length of stay in a residential care home has increased from 829 days to 955 days.
That’s an increase of 13% over the past ten years.
With rising life expectancy and improvements in medicine, it is perhaps little surprise that residents in care homes are living for longer.
A higher standard of care might also be contributing to this longer average length of stay.
955 days is around two and a half years in a care home.
Of course this is only an average and averages can hide a wide range of outcomes; many are resident in care homes for less than two years, some are resident in care homes for significantly longer!
Another part of the research by LV= looked at how affordable these longer stays in residential care really are.
They looked at the average size of a pension pot at the start of retirement and concluded this would cover less than the cost of an average care home stay.
By the time an individual actually needs care, the pension pot is usually worth even less.
LV= also found that women face a bigger challenge then men when it comes to funding residential care.
23% of women only receive a State pension income as they enter retirement, with just 9% of men in the same position. However, women are twice as likely as men to go into residential care homes.
Another interesting part of the LV= research found that 19,000 people during the past five years have had a charge placed on their property by their local authority, in order to meet the cost of residential care.
This happens where an individual doesn’t have sufficient cash to cover the cost of care, but they do have a qualifying value in their home.
In some instances, the value of your home is exempt from the local authority means test for care fees, but where it isn’t and you are keen to retain ownership, it is possible for the local authority to place a charge on the property and lend you the money, instead of forcing you to sell.
According to John Perks, managing director of LV= Retirement Solutions:
“The UK is facing an uncertain future on the funding of long-term care, especially with the care cap being delayed. Although many of us leave the workplace in good health, as we are living longer with the average retirement now 17 years long, the likelihood of us needing residential or domiciliary care is increasing.
“In addition, we are also seeing a rise in the length of time being spent in care. This highlights a very real need for many to consider a more flexible retirement income solution such as a fixed term annuity.
“Low interest rates, coupled with social care budgets being cut, create a worrying financial backdrop for many, especially those already in retirement as they are currently faced with an open ended bill which makes it difficult to plan effectively to fund these costs.”
If you are concerned about the cost of care in later life, please do get in touch.