The UK’s social care funding shortfall will increase by 57% to £3.5bn ($4.5bn, €4.2bn) in 2024/25, according to law firm Irwin Mitchell.
The gap is anticipated to be around £1.5bn for the 2020/21 financial year.
These figures came from Irwin Mitchell’s joint study with the Centre for Economics and Business Research (Cebr), which has also warned the UK’s ability to support tens of millions of elderly people will collapse by 2029, unless the government takes decisive action.
Rachael Griffin, tax and financial planning expert at Quilter, told International Adviser: “Social care has been a ticking time bomb for a while now and, so, the findings from this latest report will not be a massive shock.
“However, this doesn’t dismiss just how important these findings are. The government have been kicking the social care issue into the long grass for years and, in the several elections, it has been one of the centre points for campaigns.
“Yet, still we have seen no progress and are unsure what to even expect next – a green paper, a white paper or a consultation on a new proposal?”
The joint report also found a worrying wealth gap is forming that may create a tiered elderly care system, with only around the top 10% of UK retired households by income able to afford to pay for nursing homes.
Even with the auto-enrolment pension scheme introduced in 2012, many people’s pension pots will fail to fund care.
Irwin Mitchell and Cebr advise that, at present, workers will need to save about 26% of average earnings for a “moderate standard of living” when they retire.
Adam Benskin, chief executive of Strabens Hall, said to IA: “Auto-enrolment pension schemes are somewhat of a double-edged sword, because the minimum contribution limits are generally insufficient to ensure that scheme members will save enough to have a financially secure retirement.
“However, there is a risk that auto-enrolment schemes create an illusion for members, and particularly those who have never previously had a pension, that they are saving enough for their retirement by contributing the minimum.
“Perhaps there should be more robust risk warnings when members are auto-enrolled to show that they understand that their pension savings may result in a shortfall in their retirement income, if they contribute the statutory minimum and illustrate what they should be saving.”
The report also said that there must be more importance placed on the need for financial planning.
“There shouldn’t be an assumption that 65 is too old to start planning, and we would urge anyone, regardless of the value of their wealth, to consult a financial planner for advice on saving for care in the future,” the report said.
Stephen Lowe, group communications director at Just Group, told IA: “Many families have to grapple, at the last minute, with the stressful realisation that care costs could significantly impact the value of any inheritance or the quality of care they can afford.
“And there’s clearly a crucial role for advisers to help clients plan for the possibility of later-life care.
“Some advice firms recognise this growing opportunity, but may be wary in advising on the topic, given the complex interaction of regulated financial advice with non-regulated areas; such as state benefits, treatment of the home in the means test and deliberate deprivation rules.”
Irwin Mitchell is calling on the government and local councils to:
- Review and reform the care funding system;
- Change the eligibility criteria for support in paying for care;
- Require councils to plan and allocate land for retirement, care and nursing homes;
- Educate workers on the importance of pensions savings; and,
- Support informal carers looking after elderly people.
Kelly Greig, partner and head of later life at Irwin Mitchell, said in the report: “With less than a decade to act, the urgency with which the government needs to address the stabilisation of the care system is critical.
“This action is vital if we’re to prevent the crisis reaching a tipping point.
“The future doesn’t have to be so bleak. There are steps families can take for their futures by considering care home fees alongside those other major financial commitments; such as pensions and mortgages.
“Proper tax planning can also go some way to help the public prepare for later life regardless of what the government is doing.”