Pensioners planning for retirement have been warned that they might need an additional £200,000 in their pension pots to secure a “moderate comfortable retirement“.
New calculations from Interactive Investor reveal the cost of nursing care is projected to hit £200,000 for new retirees.
Despite rising pension incomes, the average pensioner still falls far short of the amount required to fund care home fees. Many retirees may be forced to sell their homes or other assets if they do not start planning for this expense early.
Current figures indicate that a 66-year-old retiring in 2024 would need around £400,000 to maintain a comfortable lifestyle, but this does not account for potential care fees, which can significantly increase overall retirement costs.
With the population living longer, many retirees overlook the financial implications of healthcare in their later years.
Currently, residents in care homes needing nursing care pay an average of £135,360 for a two-year stay, which could rise to £201,128 in the next 20 years due to inflation.
An average single pensioner would face an annual shortfall of £53,853 if they need nursing care in a care home, based on updated ONS pensioner income data.
Alice Guy, head of pensions and savings at Interactive Investor, stressed the importance of planning ahead.
She told GB News: “If you’re planning ahead for retirement, then it’s useful to know more about how much care home fees could cost. The average retiree currently needs around £400,000 to fund a moderately comfortable retirement for 20 years, but that doesn’t include care home fees, which could add up to £200,000 to your costs, depending on the rules when the time comes.
“Someone with a modest wealth could still see their assets dwindle away, even with the new fee cap. It only applies to some of the costs and won’t kick in until you’ve already spent £86,000 on personal care.”
The new rules mean that those with assets between £20,000 and £100,000 will have their care home fees subsidised, but many will still pay the majority of the costs.
With nursing care costs escalating and the unpredictable nature of needing such care, it is becoming increasingly difficult for retirees to self-fund without significant assets.
Alice Guy also highlighted the unpredictable and expensive nature of care home fees, noting that “not being able to afford care is one of the biggest worries for retirees, who would love to pass on wealth but could see their plans slip through their fingers.”
She added: “Paying for care home fees for two years is almost as expensive as buying a home, but it’s much less predictable and the costs come all at once.
“The average single pensioner would have an enormous £4,487 monthly shortfall in income when it comes to paying for nursing care in a residential care home.”
