7 June 2010
Financial advisers left out in the cold on long term care advice, warns retirement specialist Partnership
1. Just 4 per cent would contact a Financial Adviser for advice on long term care, survey reveals
2. Survey shows most reckon annual LTC costs less than £30k per year
3. Many people risk running out of money - or falling back on the State at an estimated cost of nearly £1 BILLION a year
4. 53% would sell their homes to finance their care fees
5. Long term care plans can help bridge funding gap and ensure costs are covered
Only FOUR per cent of people in the over 50s age group would consider contacting a financial adviser for advice on funding for long-term care in older age, according to long term care funding specialist Partnership.
Recent research* has revealed that, while the market is ripe for financial adviser activity, the vast majority of over-50s – 53 per cent – would sell their homes to pay for care rather than fund the costs through a structured savings plan or annuity scheme on the back of professional advice.
The news will be of concern to financial advisers already struggling following the downturn in investment advice arms of their businesses following the recession.
In addition, most of those surveyed calculate the cost of long-term residential care to be less than £30,000 per year, while a third believed that care will cost less than £20,000 per year and 12% believe that care will cost less than £10,000 per year.
However typical fees for many quality care homes can add up to a third more than this figure, with around £50,000 a year being nearer the mark.
Whilst being a long way out on the costs of residential care, people were closer to the mark when it came to their life expectancy.
The survey, conducted by GfK NOP for Partnership, found that people were surprisingly accurate in their estimation of how long they are likely to live (into their 80s), how many people will go into care (roughly 40%) and optimistic in their estimation on how long for (approximately 5 years). The reality is 2 years on average but 4 years plus for self funders and 1 in 10 will live for 8 years in care.
But most people surveyed were completely unaware of the different financial products available to help them with the cost of long-term care, although surprisingly 53% would sell their home to finance their care fees.
Only 11% said they would contact their local authority for advice and information about funding the cost of care, while only 4% would contact a financial adviser and 3% would contact a care home. The majority of people did not have a clue where to go for finding advice.
“Financial advisers are just not on the radar when it comes to this sector of the market,” said Partnership’s Managing Director of Care, Chris Horlick.
“It is a measure of how far down the awareness process this vitally important area for advice to elderly people has slipped. “If people are not properly prepared for the cost of care they could run out of money and have to fall back on the State, or end up spending far more than they need to on care fees. In some cases people may have to change care home, which is extremely traumatic for the elderly,” he added.
Partnership estimates that last year local authorities in England had to pay nearly £1 billion to cover the care costs of people who ran out of money and had to fall back on the State. Out of the 53,000 people who started paying their own residential care fees last year only 7,000 secured proper financial advice.
“Educating these people as to where how to harness professional financial advice must surely be a priority for this cash strapped Government,” said Horlick.
“The Government should also be aware that 53% of people in their 50s would sell their home to cover their care fees. These people are living in the real world. Their views are clearly out of kilter with those of policy makers.
” However, a range of products is available to help fund the cost of long term care.
“Long term care plans are specialist insurance plans which, in return for a one-off lump sum payment, pay a guaranteed income for life which is tax free** if paid directly to the care provider,” he continued.
GFK NOP RESEARCH AND CONCLUSIONS AT A GLANCE
- Most people are accurate in their awareness of how long they will live for (80s), how many people will go into care (roughly 40%) and optimistic in their expectation how long for (5 years). The average is 2 years on average but 4 years plus for self funders and 1 in 10 will live 8 years in care.
- But the majority have no realistic idea of how much it will cost (65% think care home fees are less than £30,000 per year). It is extremely hard to find a care home for less than £30k per annum in the South of England with typical fees for many quality homes being £50k or above per annum. This means many people will either run out of money and fall back on the State and some may spend far more than they need to on care.
- Alarmingly most people do not know about any of the funding products available (76%). And when prompted only 12% had heard of a LTC Annuity – given the importance of this product to guarantee care payments for life.
- Just 11% would contact their local authority for advice and information about care fees, with only 4% contacting a financial adviser and 3% a care home. Only 1% expected a relative to look after them. 25% had no idea who to contact for advice.
- Partnership is working closely with local authorities and with the Government to ensure that people seeking advice about how to fund their care get it from appropriately qualified advisers. Partnership has estimated that local authorities have to pay nearly £1 bn each year to cover the cost of self funders who fall back on the State.
– Ends –
* GFK NOP interviewed 467 adults aged over 50 across the UK by telephone on 26-28 March 2010. Weights were applied to the data to bring it into line with national profiles. Full research details available on request.
** The rules governing taxation are subject to change and depend on individual circumstances
Press Enquiries Jim Boyd, Director of Corporate Affairs 0797 345 8675 / 0845 108 7240 Partnership jim.boyd@partnership.co.uk
Nicola Jones, Consultant 01273 777144 David Andrews Media Ltd nicola@davidandrewsmedia.co.uk
David Andrews, Senior Consultant - Director 07941 255855 / 01273 777144 David Andrews Media Ltd david@davidandrewsmedia.co.uk
About Partnership
Partnership is a specialist provider of financial solutions for people with health/ lifestyle conditions, as well as those suffering from a serious medical impairment. Partnership was the first company in the UK to offer higher retirement incomes by taking account of people’s health and lifestyle conditions. It has been a consistent innovator developing this sector by championing the needs of those with even modestly reduced life expectancies. Partnership has led the way in providing products designed specifically for individuals whose health and lifestyle is likely to result in a reduced life expectancy. Partnership is expert in the field of medical underwriting and has a unique in-house data set. Partnership believes that its years of accumulated data and knowledge gives it a unique understanding of the impact of health and lifestyle choices on longevity. This, in turn, enables it to offer the most accurate assessment of a client’s life expectancy and therefore offer the fairest price to them.
Partnership has the most comprehensive offering in the retirement sector and offers a complete range of Enhanced Annuity solutions, from clients who smoke or have minor health impairments, through to serious conditions such as cancer. Partnership is the largest provider of annuities for Long Term Care funding in the UK, with 80% of the market, and also offers specialist Protection solutions for clients who have been declined cover from standard providers. Partnership offers a firm commitment to supporting advisers in growing their business.
Partnership was winner of the 'Long-term Care Provider' award at Health Insurance Awards 2009 and this year’s Simply Biz ‘Annuity Provider of the Year’ award.” www.partnership.co.uk