Majority of people unaware of care costs
26 September 2011
Most of us are in the dark about how much we will have to pay for care, the Chartered Insurance Institute (CII) reveals in its new report 'Who cares?'.
CII's report shows that a staggering 80 per cent have no idea of how much they will have to pay for care, with 50 per cent believing that long-term care is free. The reality is in stark contrast to this - in fact, anyone in England with savings and assets worth more than £23,250 is responsible for the full cost of their own care. If residential care is required, the value of the family home is taken into account (as long as there is no dependent still living in the home) meaning a large proportion of people will receive no government funding towards care costs.
The cost of care
Care does not come cheap, with the average long-term care bill reaching £26,000 per annum. The average length of stay in a care home is two years, meaning that £52,000 is needed to fund this average care bill. The average pension income is often only £10,000 per annum, leaving a quite considerable shortfall.
One long-term solution recommended by the CII is increasing people's awareness of the cost of care, which in turn will hopefully encourage people to prioritise savings. Increased government funding would also help to ease the problem, but in today's economic climate this option may be uncertain or even unrealistic.
In the short-term, selling the family home to fund care costs is a common solution, but one that may not suit, or please, all. Equity release can also help, providing a lump sum which can be used to fund care costs. In fact, CII's report sees greater use of equity release as "inevitable", as most people receiving care need to rely on the value of their property to help fund it. This is particularly true for people receiving care in their own home. Using an equity release plan, they can receive a tax-free lump sum as well as retaining the right to stay in their own home for as long as they wish.
If you or a loved one is struggling to fund care costs and you would like to find out more about equity release, call us on 0800 531 6027. Lines are open Monday - Friday 9am-5.30pm. We can arrange your free, no-obligation initial appointment with a local adviser. At this appointment, your adviser will outline all your equity release options, explaining how all plans will reduce the value of your estate and may affect your entitlement to state benefits. If you want to find out how much you could release, try our free online calculator.
This is an equity release plan. To understand the features and risks ask for a personalised illustration.
Key's typical fee is 1.65% of the amount released, payable only on completion of the plan.