HOW to manage their pension is not the only challenge facing folk in retirement.
Other problems include care bills, rising inflation and insurance premiums, and property maintenance costs.
OAPs face many financial struggles other than managing their pension – here’s how to address them[/caption]
The consumer champion Which? talked to its retired members. asking them to name their key financial struggles.
Today Mr Money looks at their concerns and how to beat them.
PAYING FOR CARE
Many Which? members said the biggest challenge they’d faced was finding a care home for a relative and working out how to pay for it.
Those with capital of less than £23,250, or £27,250 in Scotland and £40,000 in Wales, are entitled to local council care funding. Those with complex needs can qualify for continuing healthcare, where the NHS pays nursing home fees.
A big financial struggle is finding a care home for a relative and working out how to pay for it[/caption]
Self-funders face care home fees of between £32,000 and £72,000 a year. Which? member Martin Ross told of the emotional and financial stress of having to organise care for his 101-year-old mother over the past decade.
Rather than sell her flat, he agreed with Plymouth City Council that it would fund her care then recoup the cost from the sale of her home after she dies.
The debt reached £48,000 before she was deemed ill enough to receive continuing healthcare.
Martin said: “There’s no doubt that without continuing NHS healthcare funding, the majority of her assets would have been absorbed by care costs.”
Other Which? members have taken steps to make sure they can stay in their own homes for as long as possible. One couple extended their property to accommodate a potential live-in carer and added a ground-floor shower room in case of mobility issues.
Emma Callery, Which?’s elderly care editor, said: “Scrutinise care home contracts to understand exactly what you’ll pay. Also check that your relative is claiming all the benefits they are eligible for.”
Retirees are particularly vulnerable to inflation as they are on a fixed income. One Which? member from Swindon said: “The current inflation rate [2.4 per cent] far outstrips any increase in my pension, so money is becoming really tight.”
Others highlighted that savings rates are still extremely low. Allan Bates from Aberdeen said: “All readily available savings rates are below the level of inflation. You can tie your money up for five years and get 2.6 per cent, but pensioners can’t tie up money for that long.”
Retirees are particularly vulnerable to inflation as they are on a fixed income[/caption]
Annuities, where you buy a monthly income for the rest of your life rather than taking a chunk of cash are less popular now but Paul Davies, Which? pensions expert, said: “One of the compelling things is the option to index-link your income. This will ensure that your guaranteed income keeps pace each year with inflation.”
Some of those surveyed are struggling with maintaining their homes and fear they’d be overcharged by unscrupulous traders.
Some have moved to smaller properties to free up cash or to make things more manageable, but downsizing can go wrong.
Some OAPs have moved to smaller properties to free up cash[/caption]
Problems include living costs being higher in the new area, and dealing with leasehold issues.
Do your homework before moving, ensuring you’ve had a good chat with the people who live in the area you want to move to.
Sarah Ingrams, Which? home expert, recommends using their Trusted Traders to find decent tradesman. Or try checkatrade.com.
Car, travel and health insurance premiums can increase disproportionately as you get older.
Which? said you could face a 200 per cent increase in car cover or a £2,000 quote for travel insurance, or be denied cover altogether.
Car, travel and health insurance premiums can increase disproportionately as you get older[/caption]
Hundreds of people said how unhappy they were with the way they’d been treated. Getting quotes can take hours, with each firm asking a different set of questions.
Dean Sobers, Which? insurance expert, said: “Comparison sites can be useful, but won’t include all companies that might cover you.”
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IMPROVE PENSION SUPPORT
PEOPLE need more support when choosing how to use their pension savings – as they are “now required to make more complicated decisions than ever before,” a watchdog has said.
The Financial Conduct Authority (FCA) has been looking at how the sector has been working since the pension freedoms were introduced in 2015.
It wants to see improvements in the clarity and timing of communications from companies before people make decisions about what to do with their pension pot.
The FCA is proposing that “wake up” packs should be sent to people from the age of 50 and then every five years until the customer has fully accessed their pension pot.
These would have to include a single-page summary in clear language, sometimes called a pensions passport, and firms would also include specific retirement-risk warnings at the same time as the new packs.
The pension freedoms give over-55s a wider range of choices over how they use their pension pot, rather than being required to buy an annuity retirement income.
The FCA said the proposed new communications would help consumers understand the risks and choices they face and prompt them to access support and guidance.
Christopher Woolard, executive director of strategy and competition at the FCA, said: “We know that the choices introduced by the pension freedoms have been popular with many consumers.
“However, they’re now required to make more complicated decisions than ever before.
“Many people need more support when making choices.
“The measures we have outlined will help them think about that earlier, create investment pathways to help them with their choices and make costs and charges easier to understand.”