Four fifths of adults have not taken any action to plan for future care costs, despite more than a quarter believing they will require residential care in old age.
As the Government prepares to raise national insurance contributions by 1.25% in April to deal with the social care funding crisis, research by Aegon revealed that 81% of adults are unprepared to pay for their share of possible future care costs. This number rises to 86% for those aged between 57-75.
More than a third (38%) said they “don’t know” how they will pay for care costs, while one in five (18%) said they would use cash savings. A similar proportion (17%) anticipated selling or releasing equity from their house. Only 6% had planned ahead by increasing pension contributions to cover any potential care costs.
Yet, 26% of adults said it is likely they will need residential care in old age, with a further 40% unsure.
While the Government has faced growing calls to defer the NI increase amid rising inflation and the growing cost of living, 34% of adults said they would be happy to pay the new tax.
The proposed increase will mean that from October 2023, individuals will not be asked to pay more than £86,000 towards the cost of social care over their lifetime. While room and board in residential care homes will come at an extra cost, this has been set at a national level of £200 per week.
The initial NI increase in April this year will largely go towards helping the NHS recover from the pandemic but it is set to become a separate health and social care levy from April 2023.
Steven Cameron, pensions director at Aegon, said: “The government is facing a barrage of calls to ease the cost of living squeeze, and it’s not surprising that this includes deferring April’s National Insurance increase. The health impact of the pandemic has shown just how important it is to have a high quality, properly funded care system, and this will have to be paid for. So if the NI increase is deferred for a year or two, we firmly hope the Government won’t delay the wider deal and will find funds from elsewhere to prop up the NHS and implement the cap on care costs as planned from October 2023.”
Cameron added: “The issue of how to fund social care has proven particularly challenging for successive governments, but the new deal is a big step in the right direction. For the first time, it gives individuals clarity on what the Government will pay and what individuals will be expected to pay themselves, based on their wealth.
“While some individuals will benefit from earlier or more generous Government support, most will need to plan ahead for this contingency. The sooner individuals start thinking about this the better. While many are facing huge day-to-day cost of living pressures, if you can afford to put a little aside regularly, the sooner you start the better.”
