As you approach retirement, you’ll have spent ample time thinking about the things you want to achieve – from around-the-world travel and new hobbies to spending more time with loved ones. But you may not have given much thought to later-life care.
While this is understandable, it’s essential to plan for potential later-life care to ensure you can maintain your financial security during retirement, whether or not care is needed.
Worryingly, research from Actuarial Post shows that only 17% of UK workers have factored care costs into their retirement planning. At the same time, 36% expect health and care costs to increase significantly as they retire.
In January 2025, the government announced millions of pounds of funding as part of a package to support the social care sector. But the independent commission launched to reform adult social care isn’t expected to complete its final report until 2028, the Guardian reveals.
As such, you may want to take matters into your own hands and start planning for later-life care costs now.
Continue reading to find out why this is so important, and some effective ways to budget for it.
It’s vital to factor the cost of care into your overarching retirement plan
When planning for your retirement, it’s worth noting that your income is unlikely to remain the same throughout the rest of your life.
You may find that you spend more during the earlier years of retirement – as you tick items off your bucket list – before your expenditure begins to slow. Outgoings might rise again in later life, especially if your health deteriorates and you require care.
This can be incredibly expensive, with Carehome.co.uk stating that the average weekly cost of care for self-funders in 2024/25 is:
- £1,160 for residential care, translating to £60,320 a year
- £1,410 for nursing care, equivalent to £73,320 a year.
Since life expectancies are relatively high in the UK now compared to the start of the millennium – and are projected to rise more as time goes on – this is a cost you may need to cover for many years.
In fact, the Office for National Statistics (ONS) reports that UK men aged 65 in 2020 could expect to live 19.7 more years, or 22 years for women. This is expected to rise to around 22 years and 24 years, respectively, by 2045.
The ONS also confirms that from 2021 to 2023, men in England could expect to spend 61.5 years of their lives in good health, or 61.8 years for women. This means you could spend roughly 20 years in poor health.
There will be financial implications to this and without careful planning, you could run out of money when you need it most.
Planning for later-life care needs to start early, but it’s never too late
While it’s prudent to account for later-life care costs as early as possible, it’s never too late to take proactive steps.
A wise starting point is to assess your potential budget in retirement, keeping in mind that your spending may fluctuate. Think about how much your desired retirement lifestyle will cost and consider allocating some of your disposable cash to cover potential care costs.
Working with a financial planner could help here. By plotting your income and expenditure in various scenarios, we can help you decide if you have sufficient wealth accumulated to meet your goals while also covering potential care costs. We can also help you devise a contingency for your fund if care isn’t required.
This is particularly relevant given that, from April 2027, pensions will no longer fall outside your estate for IHT purposes.
In the past, one tax-efficient way to fund care might have been to set aside an unused pension pot for the purpose. We can help you to look at different strategies, such as gifting assets during your lifetime or setting up trusts.
Get in touch
Please email hello@globeifa.co.uk or call us on 020 8891 0711 to discuss how Globe IFA’s expert financial advisors can help you plan for potential later-life care costs.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The Financial Conduct Authority does not regulate estate planning, cashflow planning, or trusts.
