15 December 2022
According to new analysis from Quilter, the wealth manager and financial adviser, retirees wanting a comfortable retirement and enough money for care would need to build up an estimated £470,000 in retirement wealth.
Using the PLSA’s Retirement Living Standards definition of what constitutes a comfortable retirement, a single person would need to build up a pot of around £360,000, in addition to the state pension, to cover a comfortable retirement lasting from age 65 to 81.
However, the average length of care people require is a little over two years according to Bupa, and if that is factored into the cost of a comfortable retirement it increases to nearly £440,000 for residential care and £470,000 if requiring nursing care.
Prices during the cost-of-living crisis have pushed up the costs of care and projections show that someone hoping to self-fund a comfortable retirement as well as two years of nursing care needs an extra £85,000 compared to five years ago.
Following years of calls to produce a meaningful response to the social care crisis, the government unveiled a plan to introduce a £86,000 cap on how much an individual has to spend on care costs in their lifetime. The changes were meant to be introduced from October 2023 but are now not expected until October 2025, beyond the next general election.
The PLSA Retirement Living Standards sets an annual income in retirement of around £33,600 a year, which would cover all your needs, with some left over for fun. This includes being able to do a £59 weekly food shop, have 3 weeks holiday in Europe every year and be able to give £50 for each birthday present, among other lifestyle measures.
Shaun Moore, tax and financial planning expert at Quilter:
“The current system of social care funding is widely acknowledged as being unsustainable, yet the social care can was once again kicked beyond the next general election in Hunt’s recent Autumn Statement. This causes huge uncertainty and will cost thousands for people entering the care system prior to 2025 and perhaps beyond that.
“The government promised in its 2019 manifesto that they will seek cross-party consensus on proposals for long term reform of social care, with the express aim of ensuring that nobody needs to sell their home to pay for the costs. But is has become a poisoned chalice for successive Prime Ministers due to the eye-watering cost of fundamental reform.
“Whatever solution is eventually in place, people will still need to think carefully about saving for their own care, as whatever is on offer is likely to be the bare minimum. Personal provision for social care will make up the vast majority of how someone pays for the care they need, and it certainly won’t be a small amount so people should think carefully about not only saving for retirement but also for social care.”