Upcoming changes to state pension in 2022
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Over 6 million over-60’s plan to use their state pension to pay for long-term care, according to new research from Canada Life. Over a third (37 percent) of UK adults over the age of 60 say they would use the state pension of just £179.60 per week to contribute towards the costs of care.
This is an increase of 16 percent compared to when Canada Life asked the same question last year, taking the total to 6.3 million people.
The average cost of a care home is estimated at between £600 and £800 per week.
That means 6.3 million over-60s will need to find an additional £400 to £600 a week to afford care, on top of the full UK state pension.
The research suggests that this gap in funding is underpinned by uncertainty and a lack of planning.
Indeed, 40 percent of over 60s don’t know or haven’t planned how they will pay for their care needs in later life.
Over 60s are also looking to cash savings to pay for care, with 35 percent of over 60s saying they would use it as a source of funding.
That marks an increase of 20 percent compared to 2020, while 19 percent say they would use their private pension, an increase of 11 percent compared to last year.
As many as one in six (17 percent) Brits say they haven’t thought this far ahead, and 15 percent expect the government to cover the costs of their care needs.
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The data indicates that equity release is becoming an increasingly popular route to pay for care.
Eight percent of over-60s say they would release equity from their home to cover care costs, up from five percent in 2020.
The findings also reveal an increased awareness and understanding of equity release and its uses; just four percent said they were unaware of what equity release is.
Alice Watson, Head of Marketing, Insurance, Canada Life commented on the findings.
She said: “As a society we continue to grapple with the issue of long-term care and who pays for it.
“Recent rumours suggested the Government is looking to increase national insurance to help fund the NHS and also pay for social care, but there is no doubt there is a big funding gap.
“These findings indicate that the over 60s have thought more about their long-term care needs in the last year, perhaps in part due to the pandemic.”
Ms Watson stressed the importance of planning ahead for one’s post-working life.
“However, there are still a worrying number of people who haven’t and think their state pension will be enough to foot the bill,” she said.
“We must continue to encourage people to think about their wants and needs at the different stages of retirement and have these conversations early on, no matter how daunting they may be.
“Not only is it important to discuss plans with family members, but speaking to an adviser is a sensible first step.
“These professionals can help highlight how different financial products can be used to meet the needs of an ageing population, whether that be through their property, pension, or a blend of the two,” she explained.
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