16 July 2014

Rethinking Retirement Planning 3 - Oh dear, You're going to live a long life

With the new pension freedoms expected from April 2015 it's worth making sure that you will have enough money in later life. We are generally living longer, but unfortunately that doesn't mean we remain healthy, active, and independent right up to the end, so planning for care costs in later life is important. And that suggests you shouldn't spend all your pension money in your 60s and 70s!

Local authorities do have some obligation to provide for you when you need care, but you may not want the level of service or care that they will pay for - indeed it may not be available locally, so topping it up is your only option. A recent report from Age UK says that public funding for older people decreased by 10% in real terms. So don't expect the state to help too much.

Headlines about a planned "care cap" of £72,000 on what you will have to pay are misleading, too. That only covers the cost of care, not the "hotel" costs - accommodation and meals, for instance.

There are no longer any financial products to pre-fund your potential care costs, so planning is about setting aside sufficient assets to pay for yourself. When the time comes, you could choose to buy an "Immediate Care Annuity" which pays out for the rest of your life. If payments are made direct to a registered care provider they are tax-free.

It's a complicated area with ownership of the family home often a contentious part of it. But it's not going to get any easier any time soon. Contact us for advice to prepare.

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