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Middle Classes Couples not Saving Enough to Afford Care

19/10/2015

According to new research, many middle class households will face the prospect of dwindling savings and being unable to afford long term health care in old age.

Middle class couples who do not qualify for government assistance due to their comfortable income will have to find an estimated average of £75,000 per person for their long term care.

Smith & Williamson, the accountancy and financial services group, examined how typical middle bracket earning couples aiming to retire at 65 would fare.

If a couple earn £86,000 between them that would leave £45,000 after tax. For whatever reasons, that means that 78% do not have the required savings as most couples simply cannot or do not save enough.

Researchers said three quarters of those questioned – 76 per cent – had ‘irrationally’ optimistic views about their finances.  Just 19 per cent said their own nursing care in old age would become a spending priority – even though such costs can absorb more than half of an adult’s savings in later life.

Ministers have long expressed the desire to end the travesty of thousands of elderly people every year selling their homes to fund care. However, the government decided that this would be limited to people with less than £23,500 in assets.

In the survey, middle-earners were found to demand little from the State – with only a quarter calling for more Government services and subsidies.

Middle-income earners aged 55 and above are three times more likely to be saving as those between the ages of 35 and 44, as their children have left home and the costs of social care become more pressing.

Thirty per cent of the older age group were meeting their savings targets, compared to only ten per cent of the younger group.

The author of the report, Claudia Wood, said: ‘Britain’s middle-earners might think they’re getting by, but many aren’t saving enough or putting enough into their pension, instead crossing their fingers and hoping something will turn up.’

She asserted that the Government should be proud that middle-income families are ‘resilient, value hard work and would shun traditional handouts’. But they must be given the right information about what failing to save will mean for them in later life, she added.

Vince Smith-Hughes, a retirement expert at Prudential, said ‘fostering a savings culture is vital for the long-term financial health of individuals and the country as a whole’.

 

Written By:

Daniel James
www.danieljamesbio.com
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