The challenges of later life planning
How can advisers best tackle late life planning with clients and what more can providers do to address this rising issue?
With an extra three million people aged 65 or over living in the UK today than there were in 1984, including more than 14,000 centenarians*, there is a clear case for advisers to become more involved in later life planning.
But is the industry ready and are clients prepared to accept the need for this kind of planning? According to Peter Hamilton, Zurich’s head of retail propositions (pictured), “most people find it hard to comprehend such an old age, let alone plan for it”.
Peter believes engagement is the key to getting later life planning on the agenda and views the changes to pension legislation that came in a year ago as a valuable opportunity. “We can use the new freedoms to encourage people to save for life after work, positioning it as something they should positively anticipate,” he says.
Having plans in place could help maintain independent living through the provision of at-home support as well as providing a much needed cash injection for those facing residential care. With rising property values a major factor in greater numbers being required to fund the full cost of later life care, it’s likely that many unprepared families will be affected, even after the introduction of the ‘care cap’ in 2020.
Richard Kafton, managing director of Cedar House Financial services, has embedded later life planning into his business. For Richard, there are two scenarios which make people particularly keen to confront their later lives.
“Typically, I find clients are either later life clients who are currently in good health and are concerned about what the future holds, or younger clients whose parents need support. The younger clients are very worried about how to provide for their parents’ welfare and are also concerned about losing their inheritance.”
Governments are facing rising costs that are becoming all too visible in austere times.
Some countries have turned to technology for ways to reduce the state’s financial burden. Singapore has introduced ‘robocoach’ to help older people get maximum benefits from their workouts. Italy hs placed sensors in old people’s homes which display information on a dashboard that can be monitored and acted upon if required, while ‘roby Mini’ is China’s response – a robot companion for senior citizens living alone, which tells jokes and automatically restocks the fridge.
In the UK, reform has been the focus. But Peter believes the measures won’t be the answer for most. “In England, for example, the £72,000 care cap, deferred until 2020, covers only healthcare rather than ‘hotel’ costs. The amount accrued against the cap isn’t the amount actually paid, but the local authority rate, which differs dramatically by region,” he says.
So, has the baton been passed to financial services? Richard believes more is required from this sector. “Long-term care annuities and equity release help, but I believe there’s a dearth of products on the market and a lot more that could be done,” he says.
Peter is keen to see the market evolve and talks about an insurance-based rider benefit to Zurich’s existing whole-of-life plan. “The premiums remain the same when the rider is taken and the plan pays out a proportion of the sum assured early if the client meets certain care-based triggers.”
Vitality and AIG have offerings with variations on this theme – something that he welcomes. “More market entrants can help to grow this market as it means more insurers talking to more advisers who can talk to more customers about the impact of ageing and some of the financial consequences.
“While we continue to work on products to better meet the needs of an ageing population, I’m confident the challenge is less about product features and pricing and more about engagement with people young and old.”
* ‘Estimates of the very old’ – September 2015, Office for National Statistics
This article was first published in Zurich’s Advice Matters magazine.