As technology and medicine advance, Brits are living longer and healthier lives. The Office for National Statistics (ONS) report that boys born in 2020 in the UK can expect to live to 87, with girls reaching age 90.
By 2045, these figures will rise to 90 and 92.6, respectively.
While we might all be living longer, a side-effect is a greater possibility that you’ll need some form of later-life care.
The Guardian reports that around 380,000 people live in UK care homes, with this number predicted to rise in the coming years. This is partly because of an expected rise in people living with dementia, from 900,000 to 1.6 million by 2040.
While care homes can help to ensure you receive the level of care you need, fees have increased in recent years.
Continue reading to discover why costs have been on the rise and three valuable ways you can budget for them.
High inflation has been contributing to rising care home costs
In recent years, care home costs have risen sharply. This is Money states that the average annual cost of a care home in the UK’s largest cities is around £46,000, an 11% increase in the year to February 2023.
Soaring inflation and the ongoing cost of living crisis are two of the main contributing factors to these rising costs. The ONS reports that the Consumer Prices Index (CPI) has risen from 0.3% in November 2020 to a 41-year peak in October 2022 (11.1%). It has since fallen to 7.9% for the 12 months to June.
As the cost of necessities like food and energy rise, so too have the costs to care homes.
Moreover, care homes have been facing higher insurance premiums due to heightened concerns since Covid. The Financial Times states that many care home providers paid between 300% and 400% more for insurance in 2022 than before the pandemic.
Care home costs are on the rise, but there are some helpful steps you can take to budget for them.
Here are three.
1. Incorporate the potential costs of later-life care into your long-term plans
Whether you’re almost retired, or still have decades before you stop working, it’s wise to have a long-term retirement plan in place.
It might not be easy to think about but incorporating potential care home fees is crucial. Failing to do so could mean you have a shortfall when you need the money most.
Making sure that you have adequate assets to cover potential care costs will give you peace of mind.
You might not need the funds for this purpose and we can help you to build a contingency plan too, giving you control over your money if it isn’t needed for care.
It’s prudent to undertake some research to establish how much you may need to cover care home costs, as fees vary depending on the types of support you need and the location.
This is Money gives an interesting example of how much the location can affect fees, revealing that the average annual care home costs in February 2023 were:
- £57,928 in London
- £50,494 in Edinburgh
- £40,903 in Nottingham.
2. Ensure you know what help you’re entitled to
There are several different levels of financial support available for you to cover care home costs in the UK, namely means-tested benefits, NHS continuing healthcare, and even a “Personal Expenses Allowance”.
Means-tested support essentially inspects your financial situation and establishes how much you can afford to pay for care, and how much support you’re entitled to.
Since you’ll likely have more than £23,250 in assets – the “upper capital limit” (UCL) – you’ll have to pay for your own later-life care.
However, the rules regarding means-tested support are set to change in October 2025. The UCL will rise from £23,250 to £100,000.
On top of this, you qualify for a Personal Expenses Allowance, which ensures that you have at least £28.25 a week left over after contributing to care fees as of the 2023/24 tax year.
Additionally, if you have complex care needs, you may also be entitled to NHS continuing healthcare, a non-means-tested package that covers the cost of your care and accommodation following a disability or illness.
This financial support could help to ensure that you don’t exhaust your funds during your retirement and that financial stress doesn’t compound any health concerns at that time.
3. Speak with a professional
It’s important not to put things off until the last minute and may be wise to enlist the help of a financial planner.
We can help you to work out how much you realistically need to save to cover potential care home fees and incorporate these into your long-term plan.
Integrating potential care home costs into your long-term plan is key to providing confidence, control, and peace of mind, whatever the future brings. And you’ll have a contingency to fall back on if care isn’t needed.
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Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
