A ‘dementia tax’ exists today (Pt 1)

Dementia is a big and growing problem (Part 1)

One of the most frightening changes in the health of society today is the increase in the incidence of Dementia.

What we are seeing is a shift in the types of illnesses that are killing people in old age. While some chronic illnesses are beaten by modern medicine, others rise in prominence. To put it bluntly, what would have killed you in your 60s or 70s is now being overcome and instead you die in your 80s and 90s of something else. As indicated above, one of the fastest growing causes of death in old age is dementia and it is important to understand the impact of this on pensions.

The key statistics about dementia

People with Dementia in the UK in 2015 numbered 850,000*

The estimated increase of dementia in the next 10 years is 29%*

And the estimated increase in next 10 years is a staggering 235%*

Overall Cost of Dementia in the UK

The cost of Healthcare which includes both Public and Private Care and, more importantly, Unpaid Care provided by family (and friends) is £26.2 Billion*.  This is enough to pay the energy bills of everyone in the UK!

*Source – The Alzheimer’s Society

The statistics reveal two important things

  1. More and more people are going to suffer from dementia in old age as the number of people in retirement grows, and
  2. A ‘dementia tax’ exists, as the financial burden is 66% (two thirds) on privately funded care and unpaid care (such as your spouse or children looking after you).

The ‘dementia tax’ takes two shapes

  1. For the person who is suffering from dementia – their own financial assets to pay privately for care
  2. For the people who are caring for someone with dementia – there is an impact on their financial assets as well and, the loss of their ability to earn (as they are caring rather than working).

Both of these have a significant impact on pensions.

People usually meet the cost of their care & support

People usually meet the costs of their care and support from a combination of any of 4 primary sources:

  • Income, including pension income.
  • Savings or other assets they might have access to. This might include any contributions from a third party.
  • A financial product designed to pay for long-term care.
  • A deferred payment agreement which enables them to pay for their care at a later date out of assets (usually their home).

Frightening isn’t it?  And I’m sure you will already have come across this type of problem personally or know somebody in this situation.  Part 2 will be addressing how your financial adviser can help