HSBC calls for greater policymaker LTC intervention

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HSBC has called for greater policymaker intervention on raising awareness of retirement income shortfall given "massive" long-term care cost increases.

According to HSBC's The Future of Retirement report, drawn from the views of 150,000 in 15 countries, in the UK, the number of over 80s totals 2.7m with a quarter predicted to require long-term care, at an average annual cost of £26,000.

On average people surveyed expected retirement savings to run out just over half-way through retirement (56%) about the same time as they could expect to see rising health and long-term care costs.

The report called for greater intervention by policymakers to examine what can be done to make the long-term care market more cost-effective by sharing the risk between the state, insurers, employers, individuals and families better.

The HSBC 43-page document said: "The prospect of households running out of money in retirement may be addressed through insurance-based savings products designed to deal with so-called longevity risk, even where people only have access to small amounts of savings.

"Buying insurance which deals with other age-related risks, such as the need for long-term care, may help households to future-proof their finances against what might prove to be huge additional living expenses."

It added the cost associated with long-term care premiums were a major concern around the globe because the risks involved were so unpredictable.

Neil Sewell, chartered financial planner at Sewell Bryden Gunn, said the issue with a pre-funded long-term care market was the unpredictable risks.

He said: "If we have a clear cap announcement from government with no ambiguous details then that will mark the beginning of a market being able to develop.

"Long-term care now is an inevitability for the majority of people so there is a need. The issue is with clients is that they are fine to talk about retirement because it is exciting but no one wants to thinking about long-term care."

The report showed that while 54% cited poor health as a concern in retirement, the costs of funding potential medical and long-term care were going "largely unaddressed" in financial plans.

Fears in retirement among respondents included; financial hardship (57%); poor health (54%); and a lack of money for good healthcare (46%).

The latter finding was correlated to the presence of generous state-funded healthcare provision in the specific country surveyed. It was lower in the UK (31%) and Canada (34%) than in Malaysia (64%).

Mark Twigg, executive director of Cicero Consulting and author of the report said: "Retirement planning may no longer consist of simply putting money aside each month.

"With employment now seen as part of a flexible retirement plan, it is clear that the labour market will need to adapt and health and long-term care policies need to be developed aimed at promoting more active and healthy life styles among older workers.

"Efforts to raise awareness about the risks of retirement income shortfalls need to continue. So too do the fledging efforts to develop effective financial planning tools to help households evaluate that risk."

According to the The Organisation for Economic Co-operation and Development, people older than 65 years of age - especially those aged over 80 - had the highest probability of receiving LTC services, with women more likely than men.

The government has announced a £75,000 cap on care costs for self-funders with the full detail expected in the incoming Care and Support Bill and potentially the imminenet Budget.

The Dilnot Commission on Funding of Care and Support was an independent body launched 20 July 2012, tasked by Government with reviewing the funding system for care and support in England.

The review recommended a cap on care costs of £35,000.

 

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