Very often, the financial responsibility of looking after elderly relatives falls to their children or grandchildren. Indeed, I have heard comments on the radio today about the costs of home care for the elderly. According to Engage Mutual in a recent report, more than half of retirees struggle with their finances.
Nearly a third of British adults have at least one parent over the age of 65. It therefore should come as no surprise that more than one in ten fear they cannot afford to support their parents. Longevity really is becoming a problem these days. In the past, however, families did often just ‘get on with it’.
Mr. T, from Basingstoke, has enduring power of attorney for his grandmother. She has been in residential care since February 2005 due to loss of mobility. They are worried because she’s happy in the home she is in and they didn’t want to move her because they couldn’t afford it. After the sale of her house, the money would have dwindled away fast. They needed to make the money work for them.
The grandmother has a retirement income of just below £10,000 a year; her care fees amount to £33,000 a year. The sale of her property fetched £124,000 and Mr. T spent £88,000 of it on buying a care fee annuity for £24,000 a year. The amount increases every year in line with the Retail Prices Index (RPI) plus an additional two per cent. Unfortunately, when his grandmother dies some of the money spent will never be recovered.
Like a retirement annuity, the money dies with you unless you pay extra to protect it. Mr. T did arrange 50 per cent capital protection, meaning that his family will get a sum of money minus care home fees in the event of early death. The annuity is almost future-proof. They have spent a lot of money up front but it’s worth it and they have complete peace of mind because the money is more or less running itself.
Interestingly, more than three quarters of enquiries fielded by Saga last year were from people acting as power of attorney for a parent.
Few people realise the full cost of retirement until they become responsible for an elderly relative. Residential homes, for example, cost on average £20,800 a year; nursing homes cost about £30,000.
