Annuity firm says councils stand to lose £1.58bn as more people deplete their wealth to cut care costs
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The proportion of people who would be happy to reduce their assets below the £23,250 threshold in order to ensure the state pays for the majority of their long-term care has almost doubled over the last year from 23% (2013) to 41% (2014), according to specialist insurer Partnership.
With an estimated 150,000 people entering care each year Partnership says councils could be shouldering up to an additional £1.58bn burden in England alone if all of those who say they intend to spend their wealth do so. Councils in the South East (£330m) and North West (£240m) are likely to be most impacted due to the relatively high number of care homes in these regions.
However, people in the East Midlands (53%) are most likely to say they would spend their wealth and fall back on the state for support. Thomas Kenny, head of technical pricing at Partnership, said that despite the introduction of a proportion of the Care Act in April 2015, 61% of over-45s were still confused about how the care system worked, who funds it and how much it costs.
“With some viewing long-term care as a service that the state should pay for, you can see why they might think that they would rather spend their assets or give it to their families to avoid paying these bills,” said Mr Kenny.
“However, not only do 77% want the opportunity to live near their families if they go into care – not always an option for those the council funds – but 44% say they have not even thought about care so this type of forward planning is unlikely. However, when the new legislation comes into force, this is something that councils will certainly need to watch for.”
Mr Kenny said people who were keen to leave an inheritance could visit a specialist financial adviser and learn how to structure their finances to not only meet their care cost obligations but also ring-fence money to leave to their families.
“This may involve the use of an immediate needs annuity – the only financial product specifically designed to cover the cost of care which guarantees to pay an income to meet a person’s care fees no matter how long they live,” he said.