Most retirement savers don’t realise how much long term may cost when they are older – and even if they did, few can afford to pay the bill.
As a result, they are turning a blind eye to who funds their lifestyle in their later years, says a study by the Chartered Insurance Institute (CII).
The CII, a professional body for independent financial advisers, is concerned too many workers approaching retirement do not have enough provision to take care of themselves in their old age.
The report, Who cares?, highlights that the average cost of nursing home care costs around £26,000 a year, with an average stay of 24 months, giving a bill of £52,000.
The problem for an average pensioner is their fund only generates £10,000 a year, leaving a massive gap.
The report asked retirement savers and pensioners about long term care and found:
- 80 per cent had no idea how much long term care costs
- 50 per cent wrongly believe care is free
- An average pension fund does not return enough cash to fund long term care
Funding problems are worsened by the economy’s low interest/high inflation environment that means returns on savings are outpaced by the rising cost of living.
David Thomson, CII director of policy and public affairs, said: “There is clearly a massive disconnect between public perception and reality. Most of the public have no idea of how much their long-term care will cost and consequently are unlikely to be making any provision to meet that cost. Even more worrying is that half think long-term care is entirely free at the point of use. The reality is starkly different.
“Our research shows MPs have very little appetite] for a model that is fully funded by the state, over half preferring instead a partnership model similar.”
Thomson wants savers and those approaching retirement to consider the3 cost of care in the financial plans instead of ignoring the issue.
“This problem needs to be addressed through measures to increase public awareness and by reinforcing public confidence in any new financial services market that might develop,” he said.
Download a copy of the report from: www.cii.co.uk/pages/research/researchandsurveys.aspx
Related Posts :
