Traditionally, our home has represented the asset that we could pass down to our children. It’s probably time to forget that, writes Tony Watts OBE

The last few years have seen a sea change in the way we regard our homes. Yes, they have always represented one of the biggest financial achievements we aspired to within British society (a concept not shared by every nation). But the built in assumption within society that we would be able to pass this on to our family at the end of our lives has taken a bit of a knock.

Already, many of us are looking to use our homes to fund our retirement – perhaps by downsizing, or even by moving into rented accommodation. But the big unknown stretching into the future is the cost of care – especially the cost of moving into a care home, and even more so if we need nursing as well as domiciliary care.

This – for many – will mean selling their home, with the family left to pick up what might be left over after shelling out anything from £25,000 – £50,000 a year for however long it is needed.

Threats to this status quo were originally heralded with horror – I clearly remember, back in the early 1990s running a headline on people having to sell their homes to pay for residential care and being told by a cabinet minister at the time that I was making it all up. That could never come to pass in our green and pleasant land…

Since then, the number of people drawn into the maw of selling their homes has spiralled as local authorities have struggled with the imperative of reducing budgets while having to cater for the social care needs of an ever growing older population.

Over more recent years, successive governments have tried to come up with a vote winning solution that would not threaten the public purse. The latest is the provision under the Care Act, coming into force in 2017, that will “cap” the amount of money a person has to pay towards their care to £72,000.

Relief all round, many people are saying. Forget that. Because the “Dilnot taxi meter” as it’s known won’t include accommodation costs (which are pre-set at £12,000 a year), and the local authority will assume that the care home costs are the maximum rate they are prepared to pay (so £450 a week /£23,400 is typical).

Without boring you with all the maths, it means that the average care home resident will be in a care home for over six years before the local authority will be offering any financial assistance… and then only to make up the gap between £12,000 and (typically) £23,400.

During that time they will spend way, way more than £72,000. If their weekly care costs are £650 a week (not untypical) it will be around £200,000.

The average stay for a care home resident, by the way is around two years.

So anyone making plans for their later years really does need to take a very hard look at how much they will need to put by to cover their costs… and make no overly generous assumptions about how much help they might receive.

Of course other source of income might cut in – possibly Continuing Health Care or Registered Nursing Care Contribution – but they often need to be fought over using expert help . And Attendance Allowance can also be claimed. But most people’s savings and assets can soon wither away, especially if the years preceding moving into care and involved buying in social care to keep them in their own home.

So is there a bright note to end this blog?

Sort of. If you do reach the point where you need to go into care, an immediate care annuity might (repeat, might) offer a cap of sorts on how much the whole exercise might cost you, but it is a calculated gamble.

And you can find out for yourself what impact care costs might make on your asset portfolio simply by trying out a few scenarios on the www.retireeasy.co.uk Lifeplan.

Prewarned is prearmed…