Nick Bamford: We can’t ignore our demographic destiny

Nick Bamford MM 700

The topic of care fees planning was high on the agenda at a recent team meeting. Our guest speaker, Partnership’s Martyn Halls, shared with us some very interesting statistics. Apparently, there are currently some 431,000 people in residential care homes, out of a population of 3.7 million aged over 65. There are also more than 821,000 over 65-year-olds who suffer from dementia, with this number set to rise dramatically in the coming years.

As we live longer and suffer the consequences of old age (both physically and mentally) there is going to be a growing demand upon financial resources to ensure quality of care in later life.

Of those people seeking impartial, professional advice on the subject only 7,000 get it from a “qualified” adviser. That sounds to me like a huge opportunity for the IFA sector. It is pretty much a given that those seeking care for their elderly relatives have the quality of that care high on their agenda.

Another key concern is to protect as much of the relative’s estate as possible in order to ensure anticipated inheritances are not significantly or entirely eroded.

The post-war baby boomer generation is very much the sandwich generation, having to potentially balance looking after their children and elderly relatives. Care fees planning represents one of those things they need to do well. And who is better placed than an IFA to balance those two key needs and wants?

When you look at the average costs of care at home or in a residential care facility, it is easy to see how a modest estate might be significantly eroded, particularly when considering one in eight people will be in care for at least seven years of their life.

Often, when putting a financial plan together for a client, one of the “what if?” scenarios that they ask us to consider is the cost of care. The challenge, of course, is that the start and end date of care requirements are simply unknown.

The adviser will also have to deal with some of the common myths associated with this subject, such as the one involving giving everything away and making a local authority pay. Deliberate deprivation is never the panacea that some think it is.

With the recent news that the £72,000 cap on care fees is to be delayed until April 2020, it is clear that those with the financial resources to pay for care will have to pay for care. Even those in the “fortunate” position of securing local authority or NHS funding for their care needs might prefer to pay for a higher standard of privately delivered care in later life.

As financial planners, we ignore the demographic destiny of this country at our peril. Those of us who choose to focus on retirement and investment planning are quickly realising the challenges of managing decumulation of assets. Care fees take this decumulation planning to another level entirely.

Nick Bamford is executive director at Informed Choice