View the article online at http://citywire.co.uk/money/article/a525557
People do not have a clue how much long term care costs
Most people over 55 do not know that long term care can cost around £26,000 a year, while just 2% have insurance, according to Aviva.
Despite being, ‘worried, concerned or terrified’ about paying for long term care, just 2% of over 55s have insurance and most have absolutely no realistic idea of how much it costs.
Many take the view that £3,610 is a fair price for a lifetime of care – when the actual cost is closer to £26,000 a year. A huge 70% of people meanwhile, according to Aviva’s latest real retirement report, do not even think they should be the one to cover the cost.
Not paying is just unrealistic
The reality is that on average, around one in three women and one in five men aged 65 are expected to enter a care home. From then the risk of entering residential care only increases with age.
Currently the average care home costs £26,000 a year and the average stay is two years – though a significant proportion stay for more than four years and many care homes are substantially more expensive.
According to Aviva, the majority of over 55s would prefer not to pay for care – no surprise there – but concede that it is unlikely that the state can afford to pay for everyone’s care in old age.
Clive Bolton, ‘at retirement' director at Aviva, said with a rapidly ageing population, over-55s realise that they are likely to have to make some sort of contribution to the overall cost of their care.
‘What form this contribution will take is not clear but with just 2% of over-55s claiming to have long-term care insurance, the likelihood is that they will need to look to other assets such as savings, investments or housing equity,’ he added.
The most popular funding options were for the ‘better off' to contribute to the cost of their own care but for the government to pick up the tab for everyone else (51%), or for those who can afford it, to contribute to the cost of care (36%). The majority, some 53% meanwhile felt there should be a cap on how much an individual can be forced to pay towards their own care.
Reform is too costly
This latter suggestion was one of the proposals recommended by the recent Dilnot Commission report on long term care, published in July. It advocated a cap on costs at around £35,000 to £50,000 and an upper limit on ‘hotel costs’ for food and accommodation at between £7,000 and £10,000 a year. Dilnot also recommended that only those with assets, including property, worth over £100,000 should pay for the full cost of care.
Most experts believe that because of the relatively high costs of implementing the Dilnot proposals, the report will be kicked into the long grass and reform postponed once again. The Commission estimates that the recommended changes to the funding system would cost between £1.3billion for a cap of £50,000 and £2.2billion for a £25,000 cap.
A similar report from the Chartered Insurance Institute (CII) also highlights the level of ignorance of the real costs of long term care.
David Thomson, director of policy and public affairs at the CII, said, ‘there is clearly a massive disconnect between public perception and reality. Some 80% of the public have no idea of how much their long-term care will cost and consequently are unlikely to be making any provision to meet that cost’.
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