June 2019
At a glance:
- Research shows care costs are causing concern amongst baby boomer generation
- Lack of clarity about future funding is barrier to financial planning
- Employers improving – or implementing – their financial education programme could help mitigate concerns
Pensioners are ‘holding back’ from spending in retirement due to concerns around care costs, new research has revealed.
Industry research published during April found that nearly four in ten (39 per cent) of the baby boomer generation (those born between 1945 and 1964) expressed concerned they would not be able to fund their own care while three in ten said they were spending less now to ensure they would be able to afford care costs in the future.
Under the current system, individuals can apply for local authority funding for help with care costs depending on how much they earn. In general, those living in England can apply for local authority funding if their savings and assets are less than £23,250. In Scotland, the threshold for which individuals will need to fund their own care is set at £27,250.
According to Health Insurance Daily, the average cost of residential care is just over £32,000 a year with the average hourly rate being around £20.
Martin Parish, Pension Lead Consultant at Aon comments – “care fees and care fees planning has been and will continue to be a constant pressure point for retirees because one is entering the unknown - in terms of time (when might you need to access the care system) and cost - as such planning becomes a challenge. I suspect some retirees are scaling back retirement spending to provide a financial backstop however it is unlikely to enable funding care for the long term due to the amounts involved. Impact on property and inheritance planning for future generations are also likely to be impacted as retirees look to provide themselves with confidence that should financial resources be required then they would be available.”
Funding Reform
The research comes as the Centre for Policy Studies published a new report last month into social care funding which floated proposals where taxpayers would fund a so-called ‘flat-rate universal care entitlement’. Individuals would be able to contribute their own funds to this, depending on their personal circumstances.
Former work and pensions secretary Damien Green, who headed up the report before his resignation in 2017, said the state pension-style model would ‘free’ local authorities of financial burden and ‘transform’ the social care sector.
Speaking at the time, he commented: “This would involve moving from the existing system – in which the state provides care via local authorities – to a nationally funded model, where the state pays this [flat-rate] set amount for each week or month that an elderly person needs support. This would not end councils’ involvement in delivering social care, but would free them of a significant and increasing financial burden – as well as transform the incentives which currently prevent the construction of enough care homes and retirement housing.”
Improved financial education
Our 2019 Benefits & Trends study showed that out of over 200 respondents, 60 companies provided no financial education services to their employees. However, it’s an area where companies are looking to make improvements, with nearly two-thirds believing that employee financial wellbeing is an employer’s responsibility.
Martin Parish highlights how workplace financial education could help prepare employees for their post-retirement finances; “certainly the workplace is becoming a central delivery point for a wide range of employee wellbeing initiatives, financial education being one. As many employers look to segment their workers and offer retirement planning workshops these can provide insightful information on such diverse matters as care fees as well as mainstream issues relating to retirement and the complex array of choices one now faces.”
How we can help
We run a range of tailored financial education programmes to help your employees gain a better understanding of managing their finances, whatever their situation.
For more information or to discuss any of the issues outlined in this article, please get in touch by emailing us at [email protected] or call us on 0344 573 0033.
Aon UK Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales. Registered number: 00210725. Registered Office: The Aon Centre, The Leadenhall Building, 122 Leadenhall Street, London EC3V 4AN.