New research has shown the single biggest fear for many elderly people, having to sell their home to pay for the cost of care, has become an unpalatable reality for over one million families in the UK.
The figures, from NFU Mutual, show 1.1 million families have been forced to sell their home to help meet the costs of long term care over the past five years; far higher than Government estimates of 40,000 per year.
The problem looks set to worsen, after additional research earlier in the month from the Prudential, showed up to a quarter of all retired homeowners already plan to sell their homes in retirement. This was echoed by the NFU Mutual data, which found that up to 75% of people going into care, might have to sell their home to meet the cost.
The NFU Mutual and Prudential figures are higher than those originally provided by the Government and will cause alarm to retirees, who are often desperate to keep hold of their home so it can be left to younger generations in their family.
Care cap to help?
Under current rules anyone living in England, with eligible assets over £23,250, will get no state support towards the cost of their care; whilst very slightly higher limits apply in Scotland and Wales.
However, there are times when a person’s home may be excluded from the calculation, for example if a partner or other financial dependent will continue to live at the property.
The cost of care can be hugely expensive, with latest figures showing the average cost of residential care is over £27,000 per year, rising to £38,000 if nursing care is needed.
The coalition Government has introduced measures aimed at capping the amount of money an individual has to pay for their care at £72,000. However, the cap only covers the cost of care, and then only up to a level set by the Local Authority, which may be significantly lower than the actual costs. Furthermore, the cap does not apply to the cost of accommodation, which over a lengthy period in care will run to many tens of thousands of pounds.
The £72,000 cap is significantly higher than that proposed in a review into the care system by the Dilnot Commission and official figures show it will only actually benefit to a small minority of people.
As part of the reforms the Government is also proposing measures which would stop people having to sell their home during their lifetime to meet the cost of care, with the property being sold after death to meet fees which have built up during their time in care. However, this measure has been criticised by some people who point out that the property still has to be sold, just at a later date.
Impact on younger generations
Whilst the thought of having to sell their home might be distressing for older people, it could also have a significant financial impact on younger generations.
The financial crisis has bitten hard, causing many people to cut back on their pension planning, often relying instead on an expected inheritance from their parents. Having to pay for the cost of care, either from assets or after selling the family home, will significantly reduce the amount of money to be passed on to younger generations, which in turn could impact on their ability to retire.
Sean McCann, a personal finance specialist at NFU Mutual, said: “Younger generations could be in for a long wait if they’re banking on an inheritance to fund their retirement. People should be making their own retirement plans rather than factoring in property and wealth that could be whittled away by the cost of care and inheritance tax.” (Source: Telegraph)