Member Article

FCA business plan miscalculates the real cost of long term care

Kay Ingram, divisional director of LEBC Group has expressed concerns that early access to pension funds coupled with an over optimistic estimate of State provision for care costs and the State pension could lead many retirees spending too much of their pension fund early in retirement to later regret this.

In its business plan The Financial Conduct Authority (FCA) comments on the need to cater for the needs of the ageing population who are likely to need to fund a long retirement, and then may also have to find funds for care fees at the end of their lives.

Ingram says, “Unfortunately the FCA seems to believe that the Care Act will limit the cost of care per person to a cap of £72,000, after which all care costs will be met by the State. This is not the case and a detailed study of the provisions of the Care Act shows that in assessing the £72,000 private spending on care, it excludes a lot of the costs actually incurred. This means that many people may pay more than double the care cost cap, before the State and local authority step in to pick up the balance.”

The following costs are excluded from the calculation:

Any costs incurred before April 2016 Cost of “bed & breakfast” accommodation Care fees in excess of the local authority’s limit.

Ingram continued, “All these factors are likely to mean that each person requiring care should budget for twice the care cap of £72,000 if they want to maintain choices about their care.

“If the Financial Services regulator does not understand the complexity of how the care cap is calculated, what hope have consumers, who do not have a regulated financial adviser to rely on, of understanding the need to fund for long term care beyond the headline £72,000?

“Anyone approaching retirement now would be well advised to invest in a long term financial plan which will help them make provision for their long term needs as well as immediate wants. Failure to plan at retirement for increasing costs in old age will result in tough choices later. By engaging a financial planner to review the longer term consequences of early retirement, making wrong decisions now can be avoided.”

This was posted in Bdaily's Members' News section by LEBC Group Ltd .