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Consumers and Planning for Long-term Care - UK - December 2012

“Long-term care-related products and services are not just about the end user. When an elderly person needs care, it often affects several generations within a family. The financial and psychological pressures being felt by the so-called ‘sandwich generation’ – people who are simultaneously supporting themselves, their elderly parents and their own children – can be enormous.”

– George Zaborowski, Senior Financial Services Analyst

Some questions answered in this report include:

  • How prepared are people to meet the possible cost of residential care?
  • What can be done to get people thinking about long-term care earlier
  • How can more people be urged to consider equity release?
  • Should family members be more involved in the LTC planning process?

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Table of contents

  1. Introduction

      • Abbreviations
      • Executive Summary

          • Market factors
            • Number of very elderly is set to more than double by 2035
              • Figure 1: Projection of the number of UK adults aged 75 and over and 85 and over, 2012-35
            • Significant reforms to care funding system have been proposed
              • Residential and in-home care in the UK
                • Average cost of a care home without nursing care is £27,200 annually
                  • Overview of long-term care funding options
                    • Limited product options available
                      • Companies and brands
                        • The consumer
                          • Most over-45s own at least one savings or investment product
                            • Figure 2: Savings and investment product ownership, October 2012
                          • Four fifths of over-65s own their home outright
                            • Most say their savings and investments are worth less than £30,000
                              • Figure 3: Value of savings and investments, October 2012
                            • Just over half of over-45s have thought about how they would pay for care
                              • Figure 4: Level of thought given to funding long-term care, October 2012
                            • Pension income and/or state aid main ways people expect to pay for LTC
                              • Figure 5: How long-term care will be covered, October 2012
                            • At least a quarter would make significant sacrifices to stay in own home
                              • Figure 6: Attitudes and behaviour towards receiving long-term care, October 2012
                            • Two fifths agree that government should cover costs beyond a limit
                              • Figure 7: Attitudes towards paying for long-term care, October 2012
                            • What we think
                            • Issues in the Market

                                • How prepared are people to meet the possible cost of residential care?
                                  • What can be done to get people thinking about long-term care earlier?
                                    • How can more people be urged to consider equity release?
                                      • Should family members be more involved in the LTC planning process?
                                      • Trend Application

                                        • Catering to the fastest-growing segment of the population
                                          • Making life easier for everyone
                                            • 2015: Brand Intervention
                                            • Market Drivers

                                              • Key points
                                                • Increasing longevity increases the need to plan for long-term care
                                                  • Figure 8: Average life expectancy at age 65 and age 75, by gender, 2000-50
                                                • Number of very elderly set to more than double by 2035
                                                  • Figure 9: Projection of the number of UK adults aged 75 and over and 85 and over, 2012-35
                                                • Chronic disease on the rise as population ages
                                                  • One in ten spend eight or more years in care
                                                  • Legislative Environment

                                                    • Key points
                                                      • Present levels of support in payment of long-term care
                                                        • Figure 10: Long-term care asset thresholds, expense allowances and contributions, by region, 2012/13
                                                      • Scottish long-term care legislation is the most generous
                                                        • Significant reforms to care funding system have been proposed
                                                          • The government has agreed to adopt a deferred payment scheme…
                                                            • …and is boosting efforts to improve access to LTC advice…
                                                              • …but has put off committing to the key proposals
                                                              • The Cost of Residential and In-Home Care in the UK

                                                                • Key points
                                                                  • Average cost of a care home without nursing care is £27,200 per year
                                                                    • Figure 11: Average annual UK care home fees, by region, 2011/12
                                                                  • Costs can be reduced if care is received in own home
                                                                    • Figure 12: Weighted average price for an independent sector home care per hour provided for social services, by time and region, UK, 2009/10
                                                                • Funding Long-term Care

                                                                  • Key points
                                                                    • Key long-term care funding options
                                                                      • Pre-funded long-term care insurance no longer available in the UK
                                                                        • Immediate care annuities
                                                                          • Figure 13: Volume and value of new immediate care plans, 2006-11
                                                                        • Equity release schemes
                                                                          • Figure 14: Volume and value of new equity release plan sales, 2006-12
                                                                      • Companies and Products

                                                                        • Providers of immediate needs annuities
                                                                          • Partnership
                                                                            • Friends Life
                                                                              • Key providers of equity release
                                                                                • Aviva
                                                                                  • Just Retirement
                                                                                    • LV=
                                                                                    • Savings and Investment Product Ownership

                                                                                      • Key points
                                                                                        • Eight in ten over-45s own at least one savings or investment product
                                                                                          • Figure 15: Savings and investment product ownership, October 2012
                                                                                        • Over two fifths do not own a pension
                                                                                          • Four fifths of over-65s own their home outright
                                                                                            • Figure 16: Housing tenure, by age, October 2012
                                                                                          • A rising number are entering retirement with mortgage debt
                                                                                          • Value of Savings and Investments

                                                                                            • Key points
                                                                                              • Just three in ten say their savings and investments are worth £30,000 or more
                                                                                                • Figure 17: Value of savings and investments*, October 2012
                                                                                              • More than a third of personal pension owners have savings worth £50K+
                                                                                                • Figure 18: Value of savings and investments*, by savings and investment product ownership, October 2012
                                                                                              • More than two fifths of over-65s say savings are worth less than £30K
                                                                                                • Figure 19: Value of savings and investments*, by age, October 2012
                                                                                              • The high cost of residential care would deplete many people’s assets
                                                                                                • Dilnot proposals would limit asset drawdown
                                                                                                • Consideration Given to Funding Long-term Care

                                                                                                  • Key points
                                                                                                    • Over half of over-45s have thought about how they will pay for care
                                                                                                      • Figure 20: Level of thought given to funding long-term care, October 2012
                                                                                                    • Positive link between age, affluence and level of thought given
                                                                                                      • Figure 21: Level of thought given to funding long-term care, by age, October 2012
                                                                                                    • Planning ahead essential for those who do not qualify for state aid
                                                                                                    • Paying for Long-Term Care

                                                                                                      • Key points
                                                                                                        • Pension income and/or state aid main ways people expect to pay for LTC
                                                                                                          • Figure 22: How long-term care will be covered, October 2012
                                                                                                        • Equity release often viewed as an option of last resort
                                                                                                          • If using just one resource, it’s most likely to be state aid or property sale
                                                                                                            • Figure 23: How long-term care costs will be covered, by repertoire on how long-term care costs will be covered, October 2012
                                                                                                          • Those willing to sell property should be made more aware of alternatives
                                                                                                            • Funding preferences mostly linked to affluence
                                                                                                              • 25% of over-75s expect financial support from family
                                                                                                                • Marketing to the sandwich generation
                                                                                                                  • Not thinking about LTC can lead to unrealistic expectations of state aid
                                                                                                                    • Figure 24: How long-term care costs will be covered, by level of thought given to funding long-term care, October 2012
                                                                                                                • Attitudes and Behaviour Towards Long-term Care

                                                                                                                  • Key points
                                                                                                                    • At least a quarter would make significant sacrifices to stay in own home
                                                                                                                      • Figure 25: Attitudes and behaviour towards receiving long-term care, October 2012
                                                                                                                    • Age a key influence on attitudes towards care
                                                                                                                      • Figure 26: Attitudes and behaviour towards receiving long-term care, by age, October 2012
                                                                                                                    • Few have discussed long-term care needs with family
                                                                                                                      • Making it about the family may encourage more to open up
                                                                                                                        • Wealth and attitudes towards receiving long-term care
                                                                                                                          • Figure 27: Attitudes and behaviour towards receiving long-term care, by value of savings and investments, October 2012
                                                                                                                        • A third who have given LTC a lot of thought are worried about costs
                                                                                                                          • Figure 28: Attitudes and behaviour towards receiving long-term care, by level of thought given to funding long-term care, October 2012
                                                                                                                      • Attitudes Towards Paying For Long-term Care

                                                                                                                        • Key points
                                                                                                                          • Two fifths agree that government should cover costs beyond a limit
                                                                                                                            • Figure 29: Attitudes towards paying for long-term care, October 2012
                                                                                                                          • Variation in attitudes primarily driven by affluence
                                                                                                                            • Figure 30: Attitudes towards paying for long-term care, by socio-economic group, October 2012
                                                                                                                          • Current system seen as unfair to those with modest levels of savings
                                                                                                                            • Figure 31: Attitudes towards paying for long-term care, by value of savings and investments, October 2012
                                                                                                                          • Those thinking about LTC are more willing to take some responsibility
                                                                                                                            • Figure 32: Attitudes towards paying for long-term care, by level of thought given to funding long-term care, October 2012
                                                                                                                          • Covering LTC costs should be viewed as a key retirement savings goal
                                                                                                                            • An emerging opportunity for advisers?
                                                                                                                            • Appendix – Funding Long-term Care

                                                                                                                                • Figure 33: Share of immediate care plan sales (value), by distribution channel, 2006-11
                                                                                                                                • Figure 34: Share of equity release sales (volume), by distribution channel, 2006-11
                                                                                                                            • Appendix – Savings and Investment Product Ownership

                                                                                                                                • Figure 35: Savings and investment product ownership, by demographics, October 2012
                                                                                                                                • Figure 36: Savings and investment product ownership (continued), by demographics, October 2012
                                                                                                                            • Appendix – Value of Savings and Investments

                                                                                                                                • Figure 37: Value of savings and investments, by demographics, October 2012
                                                                                                                                • Figure 38: Value of savings and investments (continued), by demographics, October 2012
                                                                                                                                • Figure 39: Value of savings and investments (continued), by demographics, October 2012
                                                                                                                                • Figure 40: Value of savings and investments*, by savings and investment product ownership, October 2012
                                                                                                                                • Figure 41: Savings and investment product ownership, by value of savings and investments*, October 2012
                                                                                                                            • Appendix – Consideration Given to Funding Long-term Care

                                                                                                                                • Figure 42: Level of thought given to funding long-term care, by demographics, October 2012
                                                                                                                                • Figure 43: Savings and investment product ownership, by level of thought given to funding long-term care, October 2012
                                                                                                                                • Figure 44: Level of thought given to funding long-term care, by value of savings and investments*, October 2012
                                                                                                                            • Appendix – Paying for Long-term Care

                                                                                                                                • Figure 45: Most popular how long-term care costs will be covered, by demographics, October 2012
                                                                                                                                • Figure 46: How long-term care costs will be covered (continued), by demographics, October 2012
                                                                                                                                • Figure 47: How long-term care costs will be covered, by savings and investment product ownership, October 2012
                                                                                                                                • Figure 48: How long-term care costs will be covered, by value of savings and investments, October 2012
                                                                                                                            • Appendix – Attitudes and Behaviour Towards Long-term Care

                                                                                                                                • Figure 49: Most popular attitudes and behaviour towards receiving long-term care, by demographics, October 2012
                                                                                                                                • Figure 50: Attitudes and behaviour towards receiving long-term care (continued), by demographics, October 2012
                                                                                                                            • Appendix – Attitudes Towards Paying for Long-term Care

                                                                                                                                • Figure 51: Attitudes towards paying for long-term care, by demographics, October 2012
                                                                                                                                • Figure 52: Attitudes towards paying for long-term care (continued), by demographics, October 2012
                                                                                                                                • Figure 53: Attitudes towards paying for long-term care, by savings and investment product ownership, October 2012
                                                                                                                                • Figure 54: Attitudes towards paying for long-term care, by attitudes and behaviour towards receiving long-term care, October 2012

                                                                                                                            Companies Covered

                                                                                                                            • Aviva Plc
                                                                                                                            • Babco (UK) ltd
                                                                                                                            • Cinven Ltd
                                                                                                                            • Just Retirement Ltd
                                                                                                                            • LV=
                                                                                                                            • Permira Advisers Ltd
                                                                                                                            • Resolution plc

                                                                                                                            Consumers and Planning for Long-term Care - UK - December 2012

                                                                                                                            £1,995.00 (Excl.Tax)