Business

We're growing old - but how can we pay for our care?

Our population is growing older - so how do we pay for care in the future?
Our population is growing older - so how do we pay for care in the future? Our population is growing older - so how do we pay for care in the future?

WITH an ageing population and funded support diminishing, how can you ensure you get the care you may need without impacting on your family’s future?

The simple answer is to speak to an independent financial adviser and plan ahead. But life isn’t that simple, you never know what's going to be around the corner, and there are a number of factors that can impact on the future for you and your family.

Let’s start with the facts. Between 2015 and 2020 the general population in Britain and Northern Ireland is expected to rise 3 per cent with the numbers aged over 65 expected to increase by 12 per cent to 1.1 million. The numbers aged over 85 is set to rise by 18 per cent to 300,000, while the number of centenarians could increase by 40 per cent to 7,000.

And these rises are also going to have an effect on public spending. Around 55 per cent of all UK welfare spending (£114 billion in 2014/15) is currently paid to pensioners, with the state pension by far the largest element of this. This expenditure is forecast to increase by an average of £2.8 billion a year over the next five years, resulting in spending of £128 billion by 2019/20.

Growing numbers of elderly people will also have an impact on the NHS and social care expenditure with the prevalence of long-term health conditions that increase with age.

The government also estimates that the average cost of providing hospital and community health services for a person aged 85 years or more is around three times greater than for a person aged 65 to 74 years.

A recent report by King’s Fund and Nuffield Trust found that the number of over 65s helped by councils has fallen by a quarter from 2010 to 2014 to 850,000.

In the five years to 2015, care spend by councils has fallen in real terms by 25 per cent to £5.1bn.

NHS and individual contributions topped this up to £7.2bn, but this still equates to a cut of 9 per cent, while 40 per cent of money paid to care homes comes directly as a private cost.

Ironically, vastly improved life expectancy, a result of medical breakthroughs, is causing an impact on the health services.

This can be seen with projected life expectancies. A man born in the UK in 1981 had a life expectancy of 84 years. A boy born in 2030 will be expected to live until he is 91. While a girl born in 1981 is expected to live until 89, and this could rise to 95 for those girls born in 2030. (3)

In Northern Ireland one in six people pay for their own care, while those in residential care contribute, on average, £220 towards a weekly bill of £461.

Looking ahead to the pressures of an ageing population and government spending, then private contributions could increase.

Now we know the facts, so how can we prepare and deal with them?

Firstly, plan ahead. Have that difficult conversation with your parents or your children about what may happen. Think about appointing a lasting power of attorney, as in the worst case scenario assets can be frozen and take up to six months to be unlocked if you’re not deemed to be fit to make those decisions.

Check your benefit entitlements, such as attendance allowance, or see if you can set up a deferred payment scheme with the council, which is often cheaper than triggering equity release on your home.

Also, avoid getting caught in the deprivation trap as local authorities will look at gifts made to family members and will adjust accordingly if they think they have been made to avoid paying care home charges.

Finally, check the cash flow and think about how money and assets can be managed. Buying an annuity is a consideration as tax-free payments can be made directly to a care home provider.

With so many aspects to consider it’s worth taking care of your assets and speak to an independent financial adviser to help you put together a plan to keep your finances in good health.

:: Darren McKeever (dmckeever@wwfp.net) is Northern Ireland adviser of Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority. For a free, no obligation initial chat about your individual finances, call 028 6863 2692, email info@wwfp.net or click on www.wwfp.net. Follow us on Twitter: @WorldwideFP.