The latest government legislation from Health Secretary Jeremy
Hunt announced bills for long-term care in old age are to be capped
at £75,000 from 2017. This is of particular interest to the equity
release community, with care costs a common reason for retirees
seeking additional funds.
Although the announcement is step in the right direction,
providing concrete guidelines to help people prepare for care
costs, experts have voiced caution warning the new scheme isn't as
generous or straightforward as it initially appears.
When calculating the £75,000 cap on care the bill only takes
account of the portion of the care home bill that deals with
personal care - assistance with washing, eating and dressing. In
residential care this leaves two areas outstanding; accommodation
costs and general living expenses. Furthermore, the amount paid for
personal care will be based on a local authority estimate rather
than actual care-home charges. This could fall below the commercial
rate, and as such families would need to make up the
difference.
Research by Prestige Nursing + Care (12/02/2013) has revealed
that the average cost of a room in a residential care home is
£27,404 a year, of which £13,428 are care costs. Using these
statistics, on average it would take five and a half years for the
cap to come into effect, and involve spending £145,196 on care
before receiving government support.
Despite the new government initiative, it is clear pensioners
still need to find substantial sums of money to fund later life
care. Equity release could provide a solution - and already does
for many pensioners who use the equity tied up in their homes to
fund the cost of care. Equity Release Council data reveals the
average over-55 owns a home worth £208,686 (11/02/2013). Equity
release could allow pensioners to unlock this amount to meet
outstanding care costs, while still leaving an inheritance and
without having to move house.
However, it's always important that people
receive expert advice on any form of equity release scheme. ERSA
believes educating consumers on a range of retirement finance
options is extremely important and equity release should be
included as part of this. As such, retirees should seek
specialist independent financial and legal advice to assess all of
the available options.
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