LV= predicts the average cost of long term care per person will rise by £7000 to £33,000 in real terms per year by 2025 – an increase of 27%.
This puts the total cost of long term care for the elderly in the UK at £37.9 billion a year by 2025, compared to £21.8 billion now. Cost increases would be even higher if the effects of inflation were taken into account.
Vanessa Owen, LV= Head of Equity Release said: “The UK is facing an uncertain future on the funding of long term care.
“Low interest rates and living costs continually on the up, coupled with social care budgets being cut, creates a worrying financial backdrop for many, especially those in retirement. It is a real concern for people who have the burden of long term care costs approaching, as currently they could be faced with an open ended bill which makes it difficult to plan effectively to meet these costs.
“With our report highlighting that the cost of care looks set to increase by 27% in real terms by 2025, people need to make sure they have thought about the possibility of paying for care, either for themselves or loved ones, and how it would be funded.”
The recent report from Andrew Dilnot, reviewing the funding system for long term care in England, suggests that a cap on the amount people pay towards the cost of their care be set at around £35,000, and recommends only those with assets worth over £100,000 should pay for the full cost of their care.
The report from LV= reveals 88% of Brits agree there should be a cap introduced on the funding of long term care, and 22% of this group think it should be dependent on people’s wealth and not set at the same level for everyone.
On average, people thought the cap should be set at £14,000, much lower than the cap recommended in the Dilnot report.
Almost a third (31%) believe the Government should fund the total cost of people’s long term care. The Government is due to formally respond to the Dilnot report in the coming weeks.
Owen added: “The average wealth of those over 55 is above the current limit for state funding of £23,250 meaning the cost of long term care will need to be paid for out of their own pockets under the current rules. With the average cost per person of long term care set to hit £33,000 per year by 2025, it won’t be long before personal funds run dry.
“The Government needs to address the Dilnot report, and introduce some sort of cap to ensure that people can properly plan for the possibility of paying for care, and that people’s total wealth isn’t quickly eroded.
“A large proportion of people believe using their property will be the only option they have to fund long term care.
“If people are in receiving care at home they can release the equity tied up in their property to cover the costs and remain living there, and those entering residential care can sell or rent their home.
“Equity release meets a clear need to help cover the cost of care in the home, and could be better utilised for care funding in our view. If people are considering using their property as part of their or a loved ones long term care funding then it is important to speak to a specialist financial adviser.”