Few people know how much long-term care may cost in their old age – while one in four believe they will have to pay nothing.
A general unawareness about care costs and who is responsible for paying them has led to poor preparedness for the expense in retirement.
A recent survey reveals that most people will have to sell their home to pay for care in their golden years, but very few people are saving for the eventuality.
The research by think-tank Demos found the average pension pot amounts to £50,000 and provides a £2,500 a year income, while residential care costs are around £30,000 a year.
Most are saving too little
“Saving 5% or even 10% of one’s salary is nowhere near enough to cover the costs,” says the report.
“The only viable alternative is to use insurance and/or equity release to enable modest savings to cover the costs of care, and to enable people to use housing equity without having to move home.”
The study found 56% per cent of people are saving for retirement costs, but only 5% are saving enough to cover care costs in later life.
In response to the poll, 57% of people agreed that individuals should pay for their own long-term care and that the service should not be free.
Most people favoured paying more tax to set aside money for care later in their lives.
Poorly informed and complacent
Demos Director Claudia Wood said: “It is interesting that while the public are more open to the prospect of having to take responsibility for retirement and care costs in later life, few still are making any effort to prepare financially.
“The government cannot allow the public to remain poorly informed and complacent about their need for care when they get older, how much it will cost, and how much they will need to pay.
“Developing an awareness raising strategy – including around the financial products people will inevitably have to use to pay for care in later life – is just as important as deciding on a new care funding model itself. Without the former the latter will be doomed to fail.”