When you think about retiring from work, your thoughts might turn to exotic trips abroad, spending more time with your family, or perhaps buying a second home in your favourite holiday spot.
While saving for your desired retirement lifestyle is an important part of your financial plan, it’s also essential that you factor in the potential cost of later-life care.
You might not feel comfortable thinking about growing older or becoming unwell, but planning ahead could ensure that you or your loved one receive the later-life care of your choice if you need it.
Along with many other prices, care costs have risen in recent years. According to the Actuarial Post, care costs are outstripping property price increases, with the average home value only sufficient to pay for seven years of later-life care.
Read on to learn more about why planning for later-life care is so important and find out how a financial planner could help you.
In 2024, residential care in the UK could cost you around ÂŁ1,300 a week
Figures published by Which?, have revealed that more than 400,000 people in the UK live in residential care and nursing homes. Almost half of these completely self-fund their care.
The cost of later-life care depends on several factors, including:
- Where you live
- The type of care you choose (support in your home or in a residential facility)
- The level of care you require
- Whether you’re entitled to local authority or NHS funding.
According to care home marketplace, Lottie, in 2024, the average cost of residential care if you’re a self-funder ranges from £1,035 a week in north-east England to £1,383 in London. That’s a difference of almost £14,000 a year.
For nursing home care and residential dementia care, the average weekly cost in London increases to ÂŁ1,607 and ÂŁ1,469 respectively.
With such high potential costs, budgeting for later-life care is crucial to ensure that you receive the type and level of care you need for as long as you need it.
Planning financially for later-life care could provide valuable peace of mind
There are many reasons why planning financially for later-life care is so important, including the following:
The likelihood that you’ll need care is growing
Apart from a blip during the coronavirus pandemic, life expectancies have steadily increased over time. As a result, the UK’s population is ageing.
According to the Centre for Ageing Better, the number of people aged 65 and over in the UK has risen by more than 3.5 million (a 52% increase) in the last 40 years. In 2024, this age group represents 18% of the population. Additionally, the number of people aged 80 and over is expected to more than double by 2063.
While the prospect of a longer life may sound like good news, it could also mean you’re more likely to need some type of care in later life, and you may require care for longer.
You can choose the type of care you want
The main types of later-life care you could choose from include:
- Care in your home – Support workers will visit you in your home to provide the care you need.
- Assisted living or sheltered accommodation – This could allow you to remain independent while receiving the care you need.
- Residential care – If you’re unable to live independently, you could move into a residential facility.
Planning ahead might give you time to explore your options and discuss them with your family, ensuring that you receive the type of care you want later in life.
You’ll have peace of mind
Unfortunately, you can’t predict how you’ll age or when you might need extra support in your everyday life.
So, having a plan in place to protect your wishes could be reassuring to both you and your loved ones. You’ll have the peace of mind that you’re financially prepared for any eventuality, yet still have the means to enjoy your retirement.
3 ways a financial planner can help you plan for later-life care costs
As you can see, there are many factors that could affect your later-life care costs and lots of choices for you to make.
If you’re uncomfortable thinking about your future care needs, or you feel overwhelmed at the prospect, you might benefit from seeking professional financial advice.
A financial planner can help you to:
1. Factor the cost of later-life care into your long-term plan
Planning financially for later-life care can be difficult as it’s hard to predict how much your costs might be.
A financial planner can use cashflow modelling to help you understand how different levels of care could affect your wealth. Forecasting your future finances in this way might help you factor later-life care costs into your current financial plan.
This could help you feel better prepared for the future while keeping your financial plans on track.
A financial planner can also work with you to create a long-term savings and investment strategy that allows you to grow your wealth as tax-efficiently as possible. As a result, you could accumulate the wealth you need to ensure you receive the later-life care of your choice for as long as is necessary.
2. Explore options for later-life care cover
As you can see from the figures above, the cost of later-life care could quickly erode your savings – even if you only require support for a few years.
So, putting later-life care cover in place could provide a valuable financial safety net.
A financial planner can help you explore your options and adapt your financial plan to account for the monthly costs of later-life care cover.
Of course, while having protection in place could provide reassurance, there’s always the chance that you might pay into cover and never need it. Or you may only use a fraction of the amount you’ve paid in.
This is a risk with most types of insurance, and you may find that the peace of mind it offers outweighs this potential loss.
Additionally, a financial planner can help you develop a contingency plan to protect any unused wealth you set aside for care from being taxed unnecessarily when you die. With careful Inheritance Tax planning, you could cover the potential cost of care and protect the legacy you’ll leave your beneficiaries.
3. Register a Lasting Power of Attorney
Registering a Lasting Power of Attorney (LPA) could support your plans for later-life care by ensuring that your loved ones have the legal authority to manage your affairs should you no longer be able to do so.
If you don’t have an LPA in place, decisions about your care may be made by your local authority.
There are two types of LPA:
- Health and welfare – This covers decisions such as where you live, what medical care you receive, and what your daily routine looks like.
- Property and financial affairs – This LPA gives your attorney the power to do things such as buy and sell your property, pay your bills, and manage your bank accounts.
Putting both in place could ensure that your wishes for later-life care are followed and that your family can access the finances you’ve put in place to fund it.
There’s a different process in Scotland and Northern Ireland, so it’s important to speak to a financial planner who can advise you on the relevant rules in your location.
Get in touch
If you’d like help including later-life care costs into your financial plan, we can help.
Email hello@intelligentpensions.com or call 0800 077 8807.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate cashflow planning, tax planning, or Lasting Powers of Attorney.
