The new retirement freedoms introduced last April could have resulted in many people ignoring their future care costs when making pension withdrawals.
According to a report from Citizens Advice, around three in five people who have made withdrawals from their pension pots under the new retirement fees have ignored future care costs.
Only 16% of the 500 people surveyed by Citizens Advice had made provision for future care costs when withdrawing money from their pension pots under the new rules.
A further 23% gave some thought to their future care costs and had in place a suitable backup plan, such as using equity release or selling their home to access the capital needed to pay for long-term care.
Citizens Advice discovered that many of those who did not have a plan in place for future care costs would rely on others, such as family members or the government.
In fact, one in ten people surveyed considered this to be their ‘plan’ for funding care in the future.
Almost one in three of those surveyed by Citizens Advice said they had considered future care costs but had no plan for meeting the often substantial cost of care.
The Citizens Advice study found that those in work were least likely to have a plan for meeting future care costs.
Two thirds of people who were employed full-time lacked a plan, with just over half of those who had already retired missing a plan to meet future care costs.
According to Citizens Advice, around four million older people (over the age of 65) in England have care needs, which represents nearly half of this age group.
Gillian Guy, Chief Executive of Citizens Advice, said:
“Care costs can be a heavy financial burden that many people are unprepared for.
“It is unsurprising that many people in their fifties are not thinking about how they will pay for care costs when the need for this could be 10, 20 or even 30 years away.
“But this issue does need some attention, otherwise people risk dipping into their pension now only to find they need some of the money later.
“Getting the right guidance is key in helping people think about and plan how they will fund their retirement – including costs which are more tricky to consider, such as care fees.
“There is also an opportunity for local authorities to help people plan ahead for future care costs, by providing clear information about how funding for care works and how much it costs.”
Here at Informed Choice, one of the specialist advice areas we cover is planning for the cost of residential care or care delivered in the home.
Since last December, I have been an Accredited Later Life Adviser, which is the recognised benchmark for advice skills of those advisers who specialise in the older client market.
Obtaining this specialist accreditation and becoming a full member of the Society of Later Life Advisers (SOLLA) was a real endorsement of my skills and experience in working with, and understanding the needs of, older people and their families and carers.
If you are considering withdrawing money from your pension pot, utilising the new pension freedoms, but you want to consider the future cost of care at the same time, please do get in touch.
I offer an initial meeting which is at my expense and without any obligation. You can schedule this by emailing me at martin@icfp.co.uk or calling me on 01483 274566.
