You may have meticulously planned for a comfortable retirement but overlooked one crucial factor: the potential cost of care.
Research in the Just Adviser Care Report 2025 found that 73% of adults over 45 have not considered care or its associated costs. Even if you have, the report found that most people significantly underestimate the costs.
Not accounting for care in your retirement plan can leave you with less control over how your assets are used if you need it later in life, which can potentially reduce what you’re able to pass on to your future beneficiaries.
So, it’s important to factor the possibility of care into your retirement plan with realistic figures of how much it could cost.
Read on to find out how you can make sure you’re prepared.
The real cost of care is considerably higher than most people think
The Care Report found that most people underestimate care costs by almost £25,000 a year.
60% of people thought the cost of a year in a care home would be less than £60,000 a year. However, the latest average figures are:
- £83,000 for a nursing home
- £65,000 for a residential home.
It’s important to note that these are only averages, and the costs can be significantly higher depending on where you live.
So, if you or your partner requires care, these costs can quickly add up to hundreds of thousands of pounds.
Currently, you won’t qualify for local council support for care costs in England if your total assets exceed £23,250, known as the “upper capital limit”.
The “lower capital limit” is £14,250. If your assets fall below this level, the local authority will fund your care. If your assets are between the upper and lower capital limits, you may receive some financial assistance on a sliding scale.
As such, without careful planning, social care costs could significantly reduce the value of your estate.
Planning for the costs of care can help ensure more of your estate is preserved
While you may not ultimately require care, making a plan for what to do if you or your partner needs it can help ensure your assets are used as you intend and that more of your estate is preserved for your loved ones.
A financial planner can help you factor the costs of care into your retirement plan and can assist in the following ways.
Exploring immediate needs annuities
An immediate needs annuity is designed to cover care costs by paying your provider some or all of the fees for the rest of your life, in exchange for a one-off lump sum. Many policies are index-linked, meaning payments can rise over time in line with the cost of care.
This approach can provide peace of mind, as paying a fixed amount upfront means you know exactly how much of your estate will be used to fund care, helping to protect the remainder for your beneficiaries.
However, the cost of an immediate needs annuity can be very high and will vary depending on factors such as your age, health, and the level of fees required.
A financial planner can help you explore annuities and assess whether this option is suitable for your situation.
Cashflow modelling
A financial planner can also use cashflow modelling to project a range of potential scenarios, including different sources of funding for care, so you can see how they would affect your wealth and estate.
By building a clear picture of how your finances may change over time, you can better understand whether you’re on track to cover potential care costs or need to make adjustments.
This can provide reassurance and help you make decisions to ensure you’re financially prepared, so you know how any choices you make could impact your estate and legacy.
Advising on Lasting Powers of Attorney
A Lasting Power of Attorney (LPA) is a legal document that enables someone you trust to make financial and health decisions on your behalf if you’re no longer able to do so.
Putting an LPA in place can help ensure your care and finances are managed in line with your wishes. This can help offer peace of mind that your wealth and health will be looked after if your circumstances change.
A financial planner can support you in setting up an LPA and can work alongside your chosen attorney to ensure your finances are used in accordance with your needs and wishes over time.
Exploring how gifting could support your estate plan
Gifting assets during your lifetime can be an effective way to reduce the value of your estate while ensuring more of your wealth reaches your loved ones. This can potentially lower any future Inheritance Tax (IHT) liability and ensure certain assets are protected from being used to cover care costs.
A financial planner can help you assess whether gifting is appropriate for your situation. They can then work with you to structure gifts effectively and balance supporting your beneficiaries with maintaining your own long-term financial security.
Get in touch
Our team of independent financial advisers in Lewes is here to support you in creating a plan that considers your potential needs and future wishes when preparing for the costs of social care.
To find out more, please get in touch by emailing us at financial@barwells-wealth.co.uk or by phone on 01273 086 311.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
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.
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