Self-employed workers planning for their retirement across the UK could be at risk of significantly downplaying the possibility of needing later-in-life care, research from independent consultancy Barnett Waddingham finds.
The company, which has offices in Leeds, says more than a third of people expect their health and care costs to increase substantially well into their retirement, but fewer than one in five have fully factored having to go into care into their retirement plan even though the annual cost of care could be between £60-£70,000.
Mark Futcher, Partner and Head of DC at Barnett Waddingham, says: “There’s no doubt about it, the UK’s care crisis is deeper than we thought. As of now, Age UK estimates there are 2.6 million people aged 50+ in England unable to even access care; including hundreds of thousands stuck on waiting lists, or waiting for their needs to be assessed. Now, our data suggests that millions more are unlikely to even be able to afford it when they reach retirement.
“While there are numerous factors to take into account, what’s evident is that very few people are even thinking about their health or care considerations when planning for their retirement. As a result, we’re at risk of a growing population with woefully inadequate pension savings that could buckle under pressure at even the slightest sign of illness in retirement.
“While education, awareness and financial guidance will play an important part in fixing this problem; time and time again, the inadequacy of auto-enrolment workplace pension contributions is the main problem that must be resolved. With details of the Government’s highly-anticipated pensions review still to come, there’s an urgent need to fix our pension system to ensure better outcomes for retirees, whether they need care or not.”
More than half of those aged between 55 and 64, or those closest to retirement, expect health and care costs to remain stable in the first decade, and significant proportions – 38% and 30% – carry this belief into the second and third decades, respectively. And while fewer expect increased costs in their first decade (34%), more than two-fifths of this age group anticipate increased costs well into their fourth decade of retirement.
The findings raise concern that many workers could be significantly unprepared for, or unaware of the financial realities of retirement, particularly as care needs and costs often increase over time. A fifth (20%) expect that they will be retired for 10-15 years, but fewer (18%) said they considered their current health when estimating this, and just 20% their lifestyle decisions.
