Long Term Care

The demand for long term care has increased over recent years and is likely to continue increasing for the foreseeable future. As the average life expectancy for both men and women rises so too does the amount of care that people require. A study by the Institute of Actuaries forecast that the number of people of pensionable age will grow from 7.8 million in 1996 to 12.4 million in 2031, an increase of 60% and that the numbers aged over 85 will grow by 88% from 0.9 million in 1996 to 1.7 million in 2031. The same study forecasts that the number of people requiring residential care would need to expand from approximately 400,000 in 1996 to 670,000 in 2031, an increase of around 65%,  and in addition the number of ‘home care hours’ would increase by around 48% during the same period.

While historically people have felt they will be able to rely on the state and/or their family as they get older, a number of demographic factors and social trends point towards an inevitable shift towards self-funding:

Life Expectancy

Life expectancy rose significantly during the last century. The Government Actuary’s Department advises that the average life expectancy for a man aged 65 in 2004 is 19.2 years and that for a woman aged 65 in 2004 is 21.9 years. Life expectancy is expected to continue to improve. As long term care is an “old-age” issue, this longevity can only result in more people requiring care.

Medical Science

One of the main factors in increasing life expectancy has been the extraordinary advance that has been made in medical technology. Many conditions that previously would have been regarded as terminal can now be treated resulting in a significant improvement in mortality rates since the 1960s particularly for those over 70.

Social Fragmentation

There have been a number of other significant social changes over recent years all of which impact on care for the elderly.  Traditionally many people relied upon unpaid care provided by relatives who tended to live nearby, often in the same house. As more people have moved from one area to another to attend further education or to pursue their careers many families now find themselves spread around the country to the extent that close family care is no longer possible in many cases. In addition to this increased family mobility, it is no longer the accepted social norm to care for the elderly relative. While previous generations would see it as their duty to care for an elderly relative, increased social independence and freedom mean that today’s society is less likely to feel obliged or indeed capable of looking after its elderly.

Birth Rate

While the previous factors explain the rising numbers of those requiring care, the falling birth rate is crucial in determining how care is likely to be provided in the future. If the onus is to be placed entirely on the State, we would need to increase total government spending on long term care through increased National Insurance contributions and taxation. Unfortunately, while the previous factors all point to a rising number of people requiring some form of long term care, the number of working adults, as a percentage of the population, is falling and this gap is set to widen. The post war “baby boom” means that the proportion of retired people is set to increase substantially over the next 25 years. Immediately after the baby boom era, the birth rate fell dramatically due to a number of factors (the advent of the contraceptive pill, increase in the number of working women etc.). It is the children of this era that now make up the majority of the workforce. The Government Actuary’s Department advises that the ratio of persons of working age to persons over State Pension age was 3.33 and is estimated to fall to 2.62 by 2031 and continue to fall.

Put simply, the number of people requiring long term care is dramatically increasing at a time when the workforce is decreasing. Although legislation can change, the above factors make it unlikely for any Government to be able to ensure that all society’s long term care needs can be met entirely by the State.

Social and familial changes mean that fewer elderly people are being cared for by their own relatives.

As the current trends continue, it becomes increasingly important for individuals to take control of their own future care needs and plan ahead.

Long Term Care plans can cover both physical and mental disability and are designed to help you cope with the types of disability that most frequently arise in the later years of life. They can provide care services in your own home, or in a residential care or nursing home, for as long as the disability and the need for care continues.

Immediate Care plans are designed for people who require care straight away. A single premium is paid to purchase a special annuity designed to provide a guaranteed income for life in order to help provide funds towards the cost of the long term care. The product provider can offer better terms than those under a standard annuity as they will take into account the health of the person requiring care. As with ordinary annuities you can choose to have payments either that remain level or opt for a lower starting payment but with provision for it to increase each year either in line with an index, such as the RPI, or at a fixed rate. Similarly as with an ordinary annuity the payments can cease upon your death, (the normal basis for long term care plans), or include some protection of capital but by doing so you reduce the payments from the level that would have been given without such protection.

These arrangements cannot guarantee that care home costs are covered. The benefit payable is to a large extent governed by the amount of capital available as well as the health and age of the client.

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