UK Care System To Breakdown In 10 Years
Brits will have to save hundreds of pounds more every month in their pension pots in order to fund later life care.
This damning outlook comes after a new report has warned that unless the Government takes strong immediate action, the UK Care System will collapse by the end of the decade.
The report which was undertaken by Irwin Mitchell and the Centre for Economics and Business Research (Cebr) reveals a bleak position for UK’s Social Care System – with research showing that the system could reach a tipping point by 2029.
The reasons behind the downfall of the care system is partly because people are not saving enough in their pensions, but other explanations are lack of council funding, the eradication of final salary pensions and less care homes being built.
Josie Dent, Senior Economist at Cebr, says:
“The elderly care sector is desperately in need of reform in order to avert the imminent crisis.
“With the cost of care set to rise, many more elderly people will find themselves using up their wealth or turning to local authorities for support to pay for care in the future.
“With care providers being increasingly stretched, the government needs to increase its efforts to prevent the crisis from reaching a tipping point.”
The survival of the social care system has rested heavily on the Government’s shoulders for some time. In the summer of 2019, a House of Lords Committee urgently recommended the Government inject £8 billion into social care to restore the service to an acceptable standard.
Private sector firms are very reluctant to offer defined benefit pension schemes, which are based on the worker’s salary and the number of years of service, to their employees due to the excessive costs involved.
To attempt to help people save for retirement auto-enrolment pensions was introduced in 2012 but the report has warned that the majority of Brits will need to transfer hundreds of pounds more from their salary each month to fund care when they reach retirement.
Shockingly, the report revealed that UK staff pay on average £225 a month, which is well below the £799 required to live a reasonable standard of living then they reach retirement.
To rub salt into the wound further, the cost of residing in a nursing home in old age is also set to increase to £54,375 annually over the next decade, while the cost of residential homes will reach £39,124.
The report says the wealth gap will mean that only around 10 per cent of retirees will be able to afford to pay for nursing homes from their income.
The report indicates that drastic measures are needed as the UK will face a shortage of elderly care accommodation unless more care homes are built.
As local councils are being put under increasing financial pressure, they are struggling to provide adequate social care to those that need it.
With local authorities cutting back, it has meant that spending on social care has dropped by more than 10 per cent.
In 2018, The Local Government Association estimated that adult social care services would endure a £1.5 billion funding gap in 2019-20, growing to £3.5 billion by 2025.
Ros Altmann, Former Pensions Minister, says:
“Almost no-one has planned for long-term care. Despite growing numbers of frail, older people in our society, neither central nor local government has a sustainable plan to pay for care and there are no incentives for private individuals to set aside funds to meet later life care needs.
“Pensions are designed to support independent living, not the sharply higher costs of care. This important report uncovers many of the consequences. There are many aspects to this massive policy failure, which has been left unaddressed by successive governments for so long that there is no silver bullet solution.
“The sooner we all start planning for care, the better. There are measures families can take, but there are also important policy reforms which could help alleviate this crisis.”
According to research conducted by Independent Age last year, on average 1,760 older homeowners per month or 406 older homeowners every week are being forced to sell their homes to fund their social care costs.
Furthermore, almost a quarter of homeowners are planning to use the equity in their homes to fund their care costs – rather than deplete their pension pot when looking to fund the costs associated with old age.
This urgent action taken by older homeowners to release cash to pay for social care in later life also means it wipes out their children’s inheritance too.
The green paper on social care was halted last year. But during the election, the Conservative Party revealed it would provide £1 billion of extra funding a year for social care, as well as a commitment to seek cross-party consensus for long-term reform. It also promised to introduce a system which means no one will have to sell their home to fund long-term care.