How will you pay for the rising costs of care home fees?
With the average annual cost of paying for nursing home fees already at £39,000, according to recent analysis¹ this could rise to £69,500 by 2035 if current trends continue. This huge increase has been mainly attributed to the implementation of the National Living Wage which rose from £7.20 to £7.50 per hour in April 2017, and to approximately £9 per hour for those aged 25+ by 2020.
Paying staff wages is the care home industry’s most substantial cost and because most of those who work in the industry are low paid and over the age of 25, the sector is likely to suffer in comparison to others.
How much you will have to pay for care depends on where you live as fees vary hugely across England and Wales. The North East is the cheapest region, whilst the East of England is the most expensive. Research carried out by the thinktank CEBR and wealth management company Killik & Co has revealed that if the current trend of above inflation increases in care home fees continues, annual fees could rise to £69,500 for a nursing home, or £51,800 for a residential home.
The amount you pay for your care will depend on whether you live in a nursing or residential home: nursing homes are designed to provide care for elderly people with long-term health conditions and who need ongoing support and care from medical professionals. Residential homes, on the other hand, are intended for elderly people who are unable to live independently but do not require medical care.
In addition, the amount you pay for your care will depend on how long you live in a care home and although the average time spent is just over two years, it’s worth bearing in mind that the longest recorded stay was over 20 years². At present, the state pension will cover just one seventh of nursing home fees and a fifth of the fees for a residential home.
The rise in care home fees will not only impact upon pensioners with low incomes as even average pensioner incomes of those with private pensions will fail to cover the average cost of care fees: nursing home fees will cost over 120 per cent more than the average single pensioner’s income, whilst residential home fees will cost 65 per cent moreᶟ.
We’re generally living longer and as such it’s worrying to think that so few people are putting in place plans to pay for the future cost of their long-term care. It is very important to understand the range of options available as this is the best way to prevent problems for yourself and your family in the future. The rules surrounding paying for long-term care are incredibly complex and a number of issues should be taken into consideration; including the best options for property and existing assets, along with the availability of local authority funding. With this in mind, independent financial advice is more important than it has ever been before.
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¹Analysis by wealth manager Killik & Co and thinktank the CEBR.
²Source: LaingBuisson Care of Older People UK Market Report, 2013/14, PSSRU Length of Stay in Care Homes, Cebr analysis.
ᶟAnalysis by wealth manager Killik & Co and thinktank the CEBR