These costs can vary depending on the level of care needed, the location and the quality of the provider. Self funders will not have access to the same costs as the state, having to meet all the costs of care from their resources. In England, self funders are those with investment assets of £23,250 (ii) or more.

How do these costs compare to the income that a person can expect in later life? The Pension and Lifetime Savings Association (PLSA) has developed a set of annual retirement living standards for an individual, based on three levels of lifestyle: minimum, moderate and comfortable. The minimum level covers all your needs, with some left over for fun, the moderate level allows for more financial security and flexibility, the comfortable level enables more financial freedom and some luxuries.

The PLSA retirement living standards report 2024/5(iii) puts the annual retirement living costs for a single person at:

*The figures shown are the amounts of annual expenditure required to achieve the living standard, note different amounts apply for those living in London

As you can see, the average cost of care can easily exceed the minimum and moderate levels of income, and even the comfortable level in some cases. This means that a person who needs care in later life could face a significant income shock, and may have to use their savings, sell their assets or rely on their family to cover the shortfall. This could have a negative impact on their quality of life, their financial security and their wellbeing.

The foreseeable harm of care costs

The income shock of care costs isn’t a remote possibility. It’s a foreseeable harm that affects many people in later life. According to Age UK in 2023, 1.6 million people aged 65 plus have unmet needs for care and support (iv), and one in seven will face care costs of more than £100,000 (v). The likelihood of needing care increases with age, which could mean women are more likely to need care than men, due to their longer life expectancy. If we consider the average time a person aged 85 to 89 can expect to spend in care, this is 2.6 years for males and 3.6 years for females according to the ONS (vi). The 2023 Laing Buisson report shows that for self-funders, this could result in the below costs:

Despite the high probability and the high cost of care, in the ‘Just care report 2023’ (vi), Just found that even for those who had experience of helping a relative or partner find a care home only 17% of people aged 45 and over have made any plans for paying for their own care. However, if they sought professional advice 49% said they had gone on to make their own care plans.’

How to triage your clients for care advice

As a financial intermediary, you have a key role to play in helping your clients plan for their later life income and care needs. You can help them understand the risks and the options, and provide them with suitable advice and solutions. But how do you identify which clients need care advice, and when?

There are some strong signals that indicate that a client may need care advice, either for themselves or for a family member. These include:

• Living in or moving into a care home

• Receiving care in their own home or about to do so

• Being in receipt of attendance allowance, which is a state benefit for people who need help with personal care

• A sudden increase in spending, which may indicate that they are paying for care out of their income or savings

If you spot any of these signs, talk to your client. Ask them about their care needs and preferences. They'll be relying on you as their financial adviser to help them assess their eligibility for state support or other funding, and understand how to help secure a tax efficient income for life to cover the cost of care.

Conclusion

Care costs are a major threat to later life income, and many people are unaware and unprepared for this risk. As a financial adviser, you can help your clients protect themselves from the income shock of care costs, by providing them with timely and appropriate care advice and solutions. By doing so, you can add value to your client relationships, enhance your reputation and grow your business.

Sources:

1. Laing Buisson Care Homes For Older People Report 2023 https://go.laingbuisson.com/care-home-report-34

2. Age UK paying for care https://www.ageuk.org.uk/information-advice/care/paying-for-care/paying-for-a-care-home/

3. Pensions and Lifetime Savings association ‘Retirement living standards report 2024/5’ https://www.retirementlivingstandards.org.uk/

4. Age UK state of health and Care https://www.ageuk.org.uk/globalassets/age-uk/documents/reports-and-publications/reports-and-briefings/health--wellbeing/age-uk-briefing-state-of-health-and-care-july-2023-abridged-version.pdf

5. Kings Fund, Key facts and figures about adult social care https://www.kingsfund.org.uk/insight-and-analysis/data-and-charts/key-facts-figures-adult-social-care

6. Life expectancy in care homes, England and Wales: 2021 to 2022 https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/lifeexpectancies/articles/lifeexpectancyincarehomesenglandandwales/2021to2022 life expectancy in care homes in England and Wales females live 3.6 years and males 2.6 years on average

7. Just care report 2023 https://www.justadviser.com/globalassets/just-adviser/documents/2023-care-report.pdf