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The Actuary The magazine of the Institute & Faculty of Actuaries

Long-term care costs to rise 27% by 2025

The average annual cost of long-term care in the UK will increase by £7,000 to £33,000 per person in 2025, according to a report from insurer LV=


The firm’s Future of Long Term Care report, released today, predicts the total cost at £37.9bn a year in 2025, compared to £21.8bn now.

Rising life expectancy means the number of people requiring formal long-term care services at that point will grow from 840,184 today to 1.1 million, a 37% increase.

Among the factors contributing to the rising cost are women working later in life when they traditionally would have provided care, families living further apart and, most significantly, the rapidly increasing elderly population putting pressure on care services infrastructure.

While nearly a quarter of adults surveyed by LV= expect an elderly relative to need long-term care in the future, only one in four of those plan to care for them themselves, and almost half have not thought about how they will pay for it.

Nearly one in five believe they will have to fund their own long-term care, with nearly a quarter saying they would use their property to do so, either through equity release, re-mortgaging or house sale. Almost a fifth of adults said they would use savings, and 16% would use their pension income.

One in seven said they would rely on the state to cover their care costs, and a worried 12% do not think they or their family would be able to afford any care and do not know how they will pay for it.

"The UK is facing an uncertain future on the funding of long term care,” said Vanessa Owen, head of equity release at LV= (pictured).

“Low interest rates and living costs continually on the up, coupled with social care budgets being cut, creates a worrying financial backdrop for many, especially those in retirement. It is a real concern for people who have the burden of long-term care costs approaching, as currently they could be faced with an open-ended bill which makes it difficult to plan effectively to meet these costs.

Under the present system, those with assets worth over £23,250 requiring residential services in nursing and care homes are not eligible for government support. This compares with an average wealth for over-55s of £32,500 according to the report, including assets such as investments, savings, and property after mortgage, which suggests that many would have to fund the entire cost of care themselves with no help from the state.

Andrew Dilnot’s report on long-term care funding proposed a £35,000 cap on the amount people pay towards their care, and that only those with assets worth over £100,000 should pay the full costs.

A majority of those surveyed by LV= agreed a cap should be introduced but thought it should be set much lower at £14,000. One in five said the cap should be means-tested rather than flat.

One in three believed the government should fund the total cost of people's long-term care.

The Government is due to formally respond to the Dilnot report in the coming weeks.

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