Increases would be even higher if the effects of inflation were taken into account

The Future of Long Term Care report, launched by retirement specialist LV=, shows that as life expectancy in the UK increases, the number of people who will need to make use of formal long-term care services will grow from 840,184 today to 1.1 million by 2025, an increase of 37 per cent.

Cost of long-term care for the elderly
In line with a rise in the number of Britons needing long-term care, LV= predicts the average cost of long-term care per person will rise by £7,000 to £33,000 in real terms per year by 2025 [1], an increase of 27 per cent. This puts the total cost of long-term care for the elderly in the UK at £37.9bn a year by 2025, compared to £21.8bn now [2]. Cost increases would be even higher if the effects of inflation were taken into account.

What type of long-term care are people in?
The Future of Long Term Care report shows that 52 per cent (438,336) of those in formal care in the UK receive it in their home (domiciliary care), while 48 per cent (401,848) are cared for in a residential home. The split between those in residential care and those receiving care at home is expected to remain consistent in the future.

For residential services in nursing and care homes, currently those with assets worth over £23,250 are not eligible for Government support [3]. This report shows that the average wealth, including assets such as investments, savings and property after mortgage, of those over age 55 in the UK is just £32,500, indicating that under the current rules many would have to fund the entire cost of care themselves with no help from the state.

How will we fund long-term care?
While nearly a quarter of UK adults (24 per cent) expect an elderly relative to need long-term care in the future, one in four of these (7 per cent of all adults) plan to look after their loved ones themselves to avoid paying for care. Worryingly, almost half (46 per cent) of those expecting to fund care for others have not thought about how they will pay for it. Those that have say their savings (22 per cent) and salary (19 per cent) will be the main source of funding.

Nearly one in five (17 per cent) UK adults believe they will have to fund the cost of their own long-term care in the future. When asked how they would fund their own care if needed, nearly a quarter (23 per cent) said they would use their property to pay for care, either through equity release, re-mortgaging or selling their home. 18 per cent said they would use savings and 16 per cent would use their pension income.

One in seven (14 per cent) said they would rely on the state to cover their care costs, and a worried 12 per cent do not think they or their family would be able to afford any care and do not know how they will pay for it.

Why are costs on the rise?
The biggest reasons behind the rising cost of long-term care in the future are: women working later in life when they traditionally would have provided care; families increasingly living further apart, lessening the option of care within the family; and most significantly, the rapidly increasing elderly population in the UK putting pressure on the infrastructure of care services and driving up costs [4].

The UK is facing an uncertain future on the funding of long-term care. Low interest rates and rising living costs continue to be a problem, while social care budgets are being cut, creating 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 that makes it difficult to plan effectively to meet these costs.

Government funding
The report from Andrew Dilnot, reviewing the funding system for long-term care in England, suggests that a cap on the amount people pay towards the cost of their care be set at around £35,000, and recommends that only those with assets worth over £100,000 should pay for the full cost of their care. The report from LV= reveals that 88 per cent of Britons agree there should be a cap introduced on the funding of long-term care, and 22 per cent of this group think it should be dependent on people’s wealth and not set at the same level for everyone. On average, people thought the cap should be set at £14,000, much lower than the cap recommended in the Dilnot report.

The average wealth of those over age 55 is above the current limit for state funding of £23,250, meaning the cost of long-term care will need to be paid for out of their own pockets under the current rules. With the average cost per person of long-term care set to hit £33,000 per year by 2025, it won’t be long before personal funds run dry. ν

The LV= Future of Long Term Care report was produced by the Desk research team at Opinium Research using 2011 predictions of volume and cost for long-term care by the Personal Social Services Research Unit (PSSRU), with additional material from the London School of Economics and the Organisation for Economic Cooperation and Development (OECD) as well as survey findings from Opinium’s online omnibus from 16-18 April 2012 on behalf of LV= (total sample size was 2,015 UK adults aged over 18).

[1] The average cost for long-term care is currently estimated at £26,000 per year; however, the Future of Long Term Care report predicted this will increase by
2.3 per cent by the year 2015. Thereafter with a projection of a cost increase of more than 10 per cent per year, the price of a year’s long-term care per person could rise to more than £33,000 by the year 2025. This does not include the effects of inflation, which would increase this figure further.

[2] 1,149,112 (expected to be in long-term care in the UK by 2025) x £33,000 (expected cost per year by 2025) = £37,920,696,000 (or vs 2012: 840,184 x £26,000 =
£21, 844,780,704).

[3] Excluding Scotland.

[4] The rising costs predicted in this report do not include the effects of inflation which would increase the predicted figures for the cost of future care further. Instead all projections are based on 2010 constant prices as calculated by the PSSRU.