The average amount that someone has to spend if they go into a care home is now £75,000 - that's far more than the average person has in their pension pot, so how can anyone cover the cost of care?
A study by LV= has revealed that the amount people spend when they need care has rocketed. Over the last decade, the average length of stay in a care home has risen 13% to just over two and a half years. The hands-on nature of care in these homes means it costs a small fortune - so this kind of period in a care home would set you back a jaw-dropping £75,000.
If you have savings and assets of less than £23,250 (£25,250 in Scotland and £23,750 in Wales), the local council will pay the cost of care (although they may take some of your income). If you own your own home, then this will push the vast majority of people over the threshold. However, if your spouse is still living in the house, then it isn't included in calculations of your assets.
If your assets break the threshold, then even if you set aside every penny you have saved for retirement in order to pay for care in retirement, the average person wouldn't be able to cover the cost of care.
The situation for women is even more troubling. They face the double whammy of the fact that they are more than twice as likely to need long-term care, and they are more than twice as likely to retire without a pension of their own at all - so they have to rely entirely on the state. In fact almost a quarter of women are retiring in this position.
It's hardly surprising, therefore, that while 38% of people who go into care can pay their bills out of their savings, a quarter have to have their care paid for by their family members, and some 22% have to sell the family home in order to pay the bills.
Some have avoiding selling up during their lifetime, but have instead agreed with their local authority that the council will pay the cost of care - but after their death their home will have to be sold, and every penny repaid. LV= research revealed that in the past five years more than 19,000 people have taken this approach.
The government is well aware of the kinds of hardship people face when they require long-term care. They have been debating the idea of capping the cost of care for years, but have failed to put anything in place.
Long-awaited changes were due to be introduced this April - but have been pushed back to 2020. At that point the total cost of care will be capped at £72,000. You will have to pay the 'hotel' costs of residential care on top of that - but those costs will be capped at £12,000 a year. In addition, the total you can own in assets before you have to pay all the costs of care will be raised to £118,000.
What can you do?
It's reasonably good news for anyone expecting to need care after 2020, but not for anyone who needs help in the interim. John Perks, Managing Director of LV= Retirement Solutions, said: "The UK is facing an uncertain future on the funding of long-term care, especially with the care cap being delayed. Although many of us leave the workplace in good health, as we are living longer with the average retirement now 17 years long, the likelihood of us needing residential or domiciliary care is increasing. In addition, we are also seeing a rise in the length of time being spent in care."
"Low interest rates, coupled with social care budgets being cut, create a worrying financial backdrop for many, especially those already in retirement as they are currently faced with an open ended bill which makes it difficult to plan effectively to fund these costs."
The stark figures persuade many people to push the issue to the back of their minds, on the grounds that they cannot afford care and have no idea what they will do if they need help. However, there are options.
If you split your retirement into separate periods, you can plan appropriately for each one. You may choose to take nothing in the early years - and continue to work. You may then want to take a fixed term annuity with a portion of your pension fund, and leave the rest invested until you are into your 80s and the issue of care becomes more immediate.
The right solution is different for everyone, but Perks emphasises that we all need to make preparations, take advice, and make sure we find the right solution for us - regardless of whether or not we eventually end up paying for care.