The glammed-up treasure trove of private pension pots could turn to dust for the majority of the population requiring care in later life.
Dr Ros Altmann, Director-General of over-50s group Saga, says that the findings of a report by the Chartered Insurance Institute (CII), entitled “Who cares?”, highlights that despite the recent Dilnot Commission, the public remains unaware of the real cost of long-term care and the need to make personal provision to meet costs.
“Around 80% of people have no idea of how much they will have to pay for care, and around half think long-term care is free at the point of use - but today’s average pension pot will fall well short of funding long-term care costs for the one in four of us who will need it,” said Dr Altmann, who has written a chapter of the report.
“According to the Dilnot Commission on Funding of Care and Support, the current average long-term care bill is £26,000 a year, the average length of stay in a care home is two years, but the current average pension income is often only £10,000 a year, leaving a huge annual deficit.
“The key is developing an awareness and national culture of saving for later life. While private pensions may have been sold as later-life treasure troves alongside images of Mediterranean villas or sumptuous retirement apartments, the fact is that we’re in the midst of a pensions crisis which will provide many people with a far more down-to-earth later life – but the impending care crisis will dwarf it by comparison.
“There is not enough money being put aside privately or publicly, and the vast majority of the population is hoping they won’t need care, when statistically at least one in four people will need it.
“The Dilnot report highlights how failure to adjust social care policy over time has left care under-funded across the board – at national, local and individual level. The welfare state was designed in the 1940s, when the idea of millions of people living to advanced old age was unheard of. Policy has failed to move with the times and is not fit for the 21st century.
“Past Governments have failed to help people prepare for care, even though at least one in four of us will require expensive care in later life. The current system of long-term care funding is haphazard, inefficient and unsustainable.
“Government spends over £100bn on benefits, over £50bn on the health service and just £8bn on care, leaving millions of vulnerable older people at risk. The issue is that people are now living so much longer than before, which is actually great news, but our support systems are being overwhelmed.
“This means most people’s whole life savings are at risk, but many do not realise this. Of course, unlike pensions, not everyone will need care, so insurance against future care costs is one obvious potential solution. However, potential care costs that need to be insured against are unlimited, so it is impossible to find affordable insurance to give full peace of mind, and it is difficult to devise policies that will provide real peace of mind.
“There are potential solutions that could be introduced, though: For example, Care ISAs, allocating an annual pension-style allowance to provide for care, incentivising employer care plans with proper tax relief, adapting annuity rules to allow pension funds to be used to buy ‘Care Pension Annuities’, with a lower starting income but which would then provide much larger sums in later life if care is needed.
“Equity Release is inevitable, since most people needing care will probably have to access some of the value of their property; Another potential savings product that would be facilitated by a cap on private care costs would be ‘Family Care Plans’. Four family members could club resources together and save in a joint-account to ensure, say, that one of them will have their care needs covered up to the cap.”
For further information, please contact the Saga Press Office on 01303 771529.