The annual cost of long term care (LTC) in the UK is expected to rise from £26,000 per person per year to £33,000 by 2025.
Longer life expectancy means a 37% increase in the number of people needing LTC in UK by 2025.
The proportion of Brits are expecting to fund LTC for an elderly relative is 17% and 23% would use their property to cover the cost of their own LTC.
The majority (88%) believe the Government needs to set a cap on how much people pay towards care and on average they think is should be set at £14,000.
The Future of Long Term Care report, launched today by LV=, shows as life expectancy in the UK increases, the number of people that will need to make use of formal long term care services will grow from 840,184 to 1.1 million by 2025.
In line with a rise in the number of Brits needing long term care, LV= predicts the average cost of LTC per person will rise by £7,000 to £33,000 in real terms per year by 2025, an increase of 27%.
This puts the total cost of long term care for the elderly in the UK at £37.9 billion a year by 2025, compared to £21.8 billion now. Cost increases would be even higher if the effects of inflation were taken into account.
The report also showed that 52% of those in formal care in the UK receive it in their home while 48% are cared for in a residential home. This split is likely to remain the same.
For residential services in nursing and care homes, those with assets worth over £23,250 are not eligible for Government support.
LV='s estimates the average wealth, including assets such as investments, savings, property after mortgage, of those over age 55 in the UK is just £32,500 indicating under the current rules many would have to fund the entire cost of care themselves with no help from the state.
Whilst 24% of UK adults expect an elderly relative to need LTC in the future, 7% plan to look after their relatives themselves to avoid paying for care. But 46% of those expecting to fund care for others have not thought about how they will pay for it. Of those who have thought of it 22% say they will use their savings and 19% their salary.
The proportion of UK adults who believe they will have to fund the cost of LTC in the future is 17% and of these 23% said they would use their property either through equity release, re-mortgaging or selling their home, while 18% said they would use savings, and 16% would use their pension income.
Vanessa Owen, head of equity release at LV= said: "The Government needs to introduce some sort of cap to ensure that people can properly plan for the possibility of paying for care, and that people's total wealth isn't quickly eroded.
"A large proportion of people believe using their property will be the only option they have to fund long term care.
"If people are in receiving care at home they can release the equity tied up in their property to cover the costs and remain living there, and those entering residential care can sell or rent their home.
"Equity release meets a clear need to help cover the cost of care in the home, and could be better utilised for care funding in our view."
