More than half of the people who have accessed their pension pots since pension reforms were introduced in April 2015 have yet to put a plan in place for the cost of future care, a study released on Tuesday (23 August 2016) showed.
A survey of 500 people over the age of 55 carried out by Citizens Advice found that only 16% of those who have taken money out from their pensions since the new freedoms scheme was introduced last year had budgeted for care costs. The scheme, part of the Pension Tax Bill, allows people approaching retirement to make several early lump-sum withdrawals from their pensions rather than just one.
Just 23% of the respondents said they had given some thoughts to future costs, possibly by selling or remortgaging their properties, but 60% of those surveyed admitted they had not planned for the future.
Among them, one in 10 said they were hoping to rely on their family or the government.
Care costs can be a heavy financial burden that many people are unprepared for, said Gillian Guy, chief executive of Citizens Advice.
It is unsurprising that many people in their 50s are not thinking about how they will pay for care costs when the need for this could be 10, 20 or even 30 years away. But this issue does need some attention, otherwise people risk dipping into their pension now only to find they need some of the money later.
The report called for local authorities to offer face-to-face or online advice to ensure people had all the tools they needed to plan for their future.
Getting the right guidance is key in helping people think about and plan how they will fund their retirement, including costs which are more tricky to consider, such as care fees, explained Guy. There is also an opportunity for local authorities to help people plan ahead for future care costs, by providing clear information about how funding for care works and how much it costs.