Social care could change retirement forever

We all understand that the elderly population is growing at a great rate. Every government has known this for decades, but few have tried to tackle the causes and effects in any direct way. The reason for this tentative approach is probably down to short-termism – what government is going to risk going after the biggest and most influential voting group in the country when they need to be re-elected five years later? Well, now we know. One that feels so secure in its lead that they can make bold moves without any real fear of defeat.

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Andrea Rozario
29th May 2017
Andrea Rozario Bower Retirement
"For many pensioners, the solution to their financial plight has been to fall back on one of the only things that has been financially consistent – their home."

Time will tell whether this gamble will help Labour spring another political surprise - one that would surely trump Brexit and ‘The Donald’s’ victory - but regardless of the results on June 8th, the Conservatives social care announcement came as a great shock to many. No one expected the Tories to go after their traditional base and Theresa May has since been forced into making a number of changes to the planned policy. But even with these amendments and a planned cap to care costs, I believe this change will have huge ramifications on the way retirees plan their post-work life and forms yet another part of an ongoing trend of misunderstanding the lives of the retired.

How many times have we heard that the Baby Boomers have had it easy? And some would argue that compared to the younger generation they have. However there seems to me to be a serious misunderstanding about how older people are living out their days. Some would have you believe that most people’s retirements are paved with gold, but that simply isn’t the case. In truth, many retirees are struggling day-to-day as their main retirement finance vehicles, namely their pensions, have drastically underperformed and thousands are working well into their 60s and 70s in an attempt to make ends meet.

The reality is that many pensioners do not have it easy as freeing up liquid cash to actually survive is getting harder and harder. John McDonnell, Shadow chancellor and top Corbynista, recently claimed in reaction to the social care plans that, ‘We’ve got 1.7 million pensioners living in poverty in our country.’ Well he would say that, you might respond - but in truth the figure is even higher! Fact-checking organisation, Reality Check, puts the number at 1.9 million pensioners living in poverty.

For many pensioners, the solution to their financial plight has been to fall back on one of the only things that has been financially consistent – their home. Despite the fact that millions of people have seen their pensions hugely underperform, most who have made their way onto the housing ladder have watched their property grow in value significantly. Over 55s control an estimated £1.8 trillion of the UK’s housing wealth, and the Equity Release Council’s recent white paper, ‘Equity Release Rebooted: the future of housing equity as retirement income’, announced that this is expected to double to £3.6 trillion by 2036.

Using your equity as a pension replacement is of course not ideal, but for many it will be a great help. However, with the recent changes to social care retirees will have to add possible care costs to their ever-increasing financial considerations. Furthermore, with the Dilnot commission claiming that as many as 10% of elderly people will pay 6-figure sums or more for their care, this social care change could leave thousands of pensioners with little left to pass on to their children, but the care has to be paid for, the question is what is the best way to do this?

Ultimately, the planned changes to social care will shift the landscape once again for people planning their retirement. Plus, the fact that the new means-testing will take house prices into consideration will force retirees to see their home as not only integral to their financial well-being, but also their health. As an industry we must react quickly to be able to deliver the products and advice retirees will desperately need in a future landscape beset by possible confusion and worry. What’s really needed is decent affordable care for all and an ability to choose where you want to have that care and we need advisers who can help customers understand the importance of planning long term.

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