Personal Finance: Long Term Care May Soon Drain Away Your Wealth

The Birmingham Post (England), June 21, 2003 | Go to article overview

Personal Finance: Long Term Care May Soon Drain Away Your Wealth


Few issues in recent years have evoked such anger, confusion and resentment as that concerning long term care of the elderly.

The need for long term care cannot only affect quality of life, but also have a devastating impact on accumulated wealth.

In particular, emphasis has focused on the scandal of local councils over charging for placements at both nursing and residential homes.

Complex means tests are being misapplied by the local authorities to such an extent that the Health Service Ombudsman has received a record number of complaints and request for compensation.

About 475,000 people are in care. - one in every 20 people over retirement age. Increased longevity now means that the average life expectancy for a man is 75 and 80 for women.

Care is far from cheap and, unless you live in Scotland, you may have to meet all or most of the costs yourself. Indeed, if your assets exceed pounds 19,500 you will be expected to pay in full. Cash, deposits, bonds, shares and overseas assets are all taken into account. What's more, it comes as a shock to learn that this figure may also include the value of your own home.

Critics point to the injustice of and misery caused by the prevailing care system. They constantly reveal what is seen as an absurd calculation formula, eager to show that national earnings are about pounds 21,000 per annum.

Unfortunately, the crux of the matter is that successive governments have been unwilling to pay the full cost of care.

Fees for the average private nursing home in 2001 were more than pounds 20,400 a year. - that's over pounds 1,700 a month. Meanwhile, residential care homes cost an average of more than pounds 14,500 a year. - just above pounds 1,200 a month.

Yet, in spite of escalating charges, individuals can consider taking action to help themselves and next of kin. In particular, with the help of their families, they can weigh up the merits of insuring against the risk of needing long term care.

Most of the 70,000 people whose homes are sold in an average year to meet long term care costs possesses buildings insurance cover, but clearly, they do not have adequate protection against the risk of frailty in advanced age.

The prevailing predicament is aptly summed up by John Husband, financial expert for SAGA, the organisation for the over-50s, who said: 'We face a bleak choice. We can buy insurance before or after we retire, having to use part of our pension to meet the premiums.

'Alternatively we can take the risk that the need for care may never arise and accept that, if it does, it will take a big bite out of anything we may want to leave to our loved ones.'

Although it is natural to hope for the best and prudent to prepare for the worst, it makes sense for people to consider what positive action might protect their quality of life and independence in retirement.

However, the overriding factor is that now money. - not medical science. - is likely to determine access to long term care.

According to the official General Household Survey, more than half the people over the age of 65 are fit and healthy. But the same research also reveals that one in 10 people aged over 75 suffers from a long-standing illness that curtails their daily activities. …

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