The cost of care in old age is horrifying. The politicians hope that by letting us in on the sheer scale if the costs, they will persuade us to save enough cash to pay for it. Unfortunately, it's having precisely the opposite effect.
The cost of care is horrendous. The average room in a care home costs £600 a week - or £726 a week for nursing care. Assuming you need cheaper residential care, that's an average of £31,200 a year. In the South East, the average rises to £37,804 a year. The average length of stay in a home is two and a half years, which in the South East would cost an average of £94,510.
There's no limit to the cost of care either, so if we're lucky to live longer than average after going into care, we can easily spend more than £100,000 of the cash we have spent a lifetime saving.
Put off saving
The sheer scale of this expense is putting people off saving for the future altogether.
A study by Saga Money found that a third of over 50s say if they had to pay care costs down to their last £100,000, they would not save for their future. This is presumably because their reward for careful saving would just to see the lot go on care - while those without savings have the bill covered by the government instead.
Nici Audhlam-Gardiner, managing director of Saga Money commented: "People find it grossly unfair that some people get all costs funded by the state, whilst others are faced with losing a huge part of the estate they have worked hard to build up.
That's not to say that we don't want to pay a penny for care - many of those in the study agreed that people who have the means should contribute to the cost of their care. However, if they are expected to contribute too much, it's going to stop them from saving. As a result, nine in ten want to see care costs capped.
Audhlam-Gardiner says: "They strongly believe there should be a cap on care fees and that this should be set at around £60,000. If the Government sets the cap too high or the floor too low then people of all ages are saying that this would put them off building wealth for the future."
She adds: "The concept of selling the family home before or after death to pay for care does not sit well with three quarters of people, but it is not just homeowners looking to protect their inheritance that feel this way. A similar number of people in rented accommodation also said that this concept was not right."
"Clearly we need to find a sustainable solution to our care funding crisis, however without a realistic care cap in place, the move risks having the opposite effect, with people choosing to spend now rather than buying their homes or saving for later life - leaving the state to pick up an even bigger bill for the future!"
But what do you think? Would you be happy to pay for care? And would you like to see the cost of care capped? Let us know in the comments.
How we spend our pensions
How we spend our pensions
Figures from Saga show that the over 50s now account for the majority of money spent by Brits on travel and tourism. They have the time to spare, the money, and they are healthy enough to take on the world.
A poll from Abta found that in the wake of pension freedoms, 35% of people were considering cashing in at least part of their pension to travel. A separate study by Senior Railcard found that pensioners take an average of three holidays a year, plus two weekends away, and 17 day trips.
Research from Senior Railcard found that retirees eat out an average of three times a month. However, one in ten do so more than twice a week, and one in three people said that one of the first things they did when they retired was to go out for lunch with their friends.
Of course, just because retirees want to enjoy themselves, it doesn't mean they are happy to throw money away. The vast majority are keen to eat at lunchtimes, when a fixed lunch menu tends to be cheaper, and canny retirees are skilled at tracking down pensioner special offers too.
Figures from the Office for National Statistics show that on average nearly a fifth of the money spent by people aged 65-74 is on leisure. This includes everything from the cinema and theatre to golfing and gardening. They spent more on this than on food, energy bills and transport.
A report by Canada Life found that retirees are spending £4,279 a year on having fun - that’s more than £1,000 more than they spend on boring essentials, and is a 74% increase over the past ten years. It went on to predict that this trend was set to continue, and that pension freedoms would encourage people to spoil themselves a bit more in retirement
Pensioner property wealth is now over £850 billion, and all these family homes don’t look after themselves. The Senior Railcard survey put home renovations in the top 20 activities people got stuck into on retirement, and figures from ABTA found that almost a third of people who were considering raiding their pension pots under the new pension freedoms planned to spend the cash on their home. This seems like an eminently sensible investment - looking after what is undoubtedly their most valuable asset.
Unsurprisingly, while some pensioners are very well off indeed, others are struggling with debt. Figures from Key Retirement found that the average retiree has £34,000 of debt.
Most of this is mortgage borrowing - in many cases driven up by the number of people who unwittingly signed up to an interest-only mortgage. However, credit cards, overdrafts, and loans are also common. It’s why so many pensioners have used pension freedoms to access enough cash to pay their debts.
The day to day basics are swallowing up their fair share of pensioner cash too. On average, people aged 65-74 spend a third of their weekly income on essentials like food and bills - which is hardly living the high life.
The bank of gran and grandad has become an increasingly vital source of cash for families. According to Key Retirement, of those who release equity from their property, 21% of them use the cash to treat their children and grandchildren. This includes an average of £33,350 to help children get onto the property ladder, £6,000 to buy them a new car, £11,000 on family weddings, and £24,780 giving grandchildren a helping hand.
While retirees are quite rightly spending what they need to enjoy retirement, they are hardly all throwing caution to the wind, buying flash cars and spending the kids' inheritance.
Most expect to have something left over to pass onto their family after their death. Some 69% expect to leave property in their wills, and 75% expect to leave cash - according to Unbiased.co.uk - because while baby boomers know how to have fun - they also know how to save for the future.