A survey by TNS, found that nearly 30% of people over the age of 50 are not saving for the future simply because there is “no point”. That’s the equivalent of nearly six million people, over the age of 50, not savings for their retirement.
The main reason for not saving seems to be a fear that any money saved “will just be taken away later” when long term care needs to be paid for.
The findings are particularly worrying, as they come at a time when all workers in the UK aged over 22 and earning more than a certain level, £9,440 in the current year, will be automatically enrolled into a workplace pension. The aim of course is to help improve future retirement incomes and reduce people’s reliance on the State Pension.
It is clear though that continued confusion over the Government’s long term care reforms, are having a serious knock on effect on the savings habits of the next generation due to retire.
Financial experts have also pointed out that other factors, such as low interest rates, the desire to repay debt before retirement and a distrust of the financial services industry could also factors behind a lower level of savings.
Long term care confusion
It is clear that uncertainty over the Government’s reforms and the continued perception that assets, including the home, will be used to meet the cost of long term care, are having a knock on effect on the amount of money people are saving.
The Government has proposed a cap of £72,000 on the amount anyone will have to pay for the cost of care during their lifetime. However, the cap only applies to the cost of care, for example providing a nurse, and not the cost of accommodation, which many elderly people with savings or other assets above a certain level will still have to pay.
Furthermore, whilst the Government previously indicated that no one would have to sell their home during their lifetime to pay for the cost of care, it now seems that this may not be the case. It is now thought that even people with modest savings may be forced to use the value of their home to help meet the cost of care.
Reacting to the survey Caroline Abrahams, Director of Age UK, said: “The Government needs to give people a realistic idea of what the can expect to be paying for in the future. There is an urgent need for a frank and honest debate around the funding of care and who will have to pay for what.” (Source: Telegraph)