Bank of mum and dad
Forced to turn to bank of sons and daughters to fund long term care
The generation who have relied on ‘The Bank of Mum and Dad’ may unwittingly become ‘The Bank of Sons and Daughters.’ As parents fail to save for long-term care fees, children may be forced to forgo their inheritance to pay for care or stop working to look after elderly parents. The findings are revealed in a study released by Saga Care Funding Advice Services.
Only one in ten adults have seriously discussed long-term care funding with their parents and almost half (47 per cent) underestimate its cost. This is despite figures showing that care home fees are set to double in the next twenty years* meaning that all adults could face huge bills for either their own care or that of their parents. Most worryingly, over half of people (56 per cent) with parents in their 60s have not discussed ways to meet the cost of long-term care at all, despite them being in the key age bracket where solutions need to be discussed and plans made.
The Saga study also revealed a series of underestimations and misunderstandings in how people anticipate their parents would pay for long-term care. The annual cost of care is between £25,000 and £30,000; however, 47 per cent of people underestimate the bill by as much as £20,000 a year. Even considering these massive miscalculations, over half of people
(57 per cent) think it likely that any potential inheritance will be ‘eaten up’ funding long-term care.
Once informed of the true cost of care, over a third (36 per cent) of adults think that parents will be forced to turn to the ‘Bank of Sons and Daughters’ as they will not be able to afford their own care. A quarter expect their parents will have to be looked after by a family member to save money and over one in ten (11 per cent) feel that they or their siblings will have to foot the bill directly. More surprisingly, 64 per cent of people would consider caring for elderly parents themselves in order to protect an inheritance or family assets, even stopping work to do so.
*Forecast commissioned by Laing & Buisson November 2007 exclusively for Saga Research carried out by Opinium Research for Saga Care Funding Services between 17th and 21st of July 2008 amongst a UK representative sample of 2,209 respondents.
For more information or to discuss anything in this article feel free to contact Doug McLean via email or phone.
I see this was written in November 2008. I was in a position then where my mum had substantial bank savings and a substantial property, both of which were, on paper, my brother’s and my ‘inheritance’.
A month is a long time in finance! We are now in the situation where the banks have created a serious shortfall in income for pensioners, due to plummeting interest rates on savings.
We have also had to move mum into a retirement flat, which we purchased and is lovely, but the ‘credit crunch’ has hit the housing sector just as we made the decision to move her for her own welfare. Now we find her lovely property is difficult to sell, she has two council tax liabilities, she has monthly retirement service charge, and her income from savings has almost disappeared.
I cannot believe the change in our quite stable financial scenario in such a short space of time. Our ‘inheritance’ now looks as if it is seriously compromised and we are crossing our fingers for an uplift in savings interest, a quick sale of her property (for a much smaller than anticipated sum) and a return to at least some financial stability.
At the same time, my own freelance business has virtually ground to a halt because of the effort and attention required for property sale, purchase, removal arrangements, change of address, financial reorganisation to take account of the government’s £50k guaranteed limit.
Not only has the bank of mum and dad hit hard times, but my own income has all but disappeared. Let’s hope 2009 sees some improvement!