UK population unprepared for cost of long-term residential care

  • 74% cannot identify the average weekly cost of residential care in retirement
  • Less than 20% know which assets are taken into account when assessing contributions to care
  • 19% are considering using equity release to provide finance in retirement

New research by the Equity Release Solicitors' Alliance (ERSA) has found almost three quarters (74%) of people in the UK are unable identify the average weekly cost of residential care in retirement.

In the week that the Dilnot Commission on Funding of Care and Support published its findings into the funding of care and support, ERSA revealed just 26% of people could identify the average cost of care as £504 per week*. Worrying, 41% thought it was much less than this, and just 14% of those aged over 66 were able to identify the correct amount.

ERSA discovered more than 80% of people in the UK are unable to identify which of their assets the Government takes into account when assessing whether they need to contribute to the cost of personal care in retirement. While the Dilnot Commission recommended a cap of £35,000 placed on liable assets after which people  are eligible for full state support, 83% of people are unaware their bank and building society accounts are taken into consideration and 85% do not think the value of their home is included in assessments.

Faced with paying for long-term residential care in retirement, 22% are planning to use their savings and 16% hope to pay for it out of their pension, while 11% said they are already planning to use equity release to pay for this - although this rises to 68% of those aged over 66, suggesting a more realistic attitude towards the cost of retirement develops as people get older.

At present 19% are definitely considering using equity release or are planning to in retirement, however 32% of people said a Government stamp of approval for equity release would make a positive difference to the likelihood of them taking out an equity release product in the future, so this figure is likely to increase**.

Claire Barker, ERSAClaire Barker, Chairman of ERSA, said,

"The Dilnot Commission's recommendations are to be welcomed. The current system is confusing, and so anything that clarifies how the costs of long-term residential care are to be split between the citizens and the state will help people with their retirement planning.

"One of the unfortunate factors of living longer is the increased likelihood of needing to pay for long-term care costs. The State cannot afford to pay for this potentially huge bill alone and if people have built up a certain amount in assets - especially in their home - it is sensible to expect them to pay towards the costs. But it is also sensible to cap how much people will have to pay and what the Government decides to do next will be crucial.

"Equity release has always had a role to play here. In the first instance, it often allows people to stay in their own homes for longer and to pay for care there but it also has a major role to play with paying for residential care costs too. If the Government offers an endorsement of equity release we will see a significant shift in the number of people looking for advice from independent solicitors and advisers as to how equity release can form part of their financial planning in retirement."

Ends

Editors notes:Independent online survey undertaken by Wriglesworth Research in June 2011 among 1,105 UK nationally representative consumers aged 18-84, 59% of which were homeowners.

* Figures from charity Age UK using information from Laing & Buisson. It found the average weekly residential care home cost in 2010/2011 was £504, or £26,208 a year.

** If taken as a measure of how big the market for equity release is likely to grow, the ONS predicts that by 2035, 23% of the population is projected to be aged 65 and over. The population of the UK was at 62.3 million in 2010 and rising at the highest annual growth rate since mid-1962. However, even if it maintained this level, in 2035 there would still be 14.3 million people aged over 65 in the UK.

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