Average ISA savings won’t cover costs of residential care for 1 year

Written by Oliver Wade

Current savings levels in ISAs are “far too modest to even scratch the surface” of paying for residential care in later life, according to Just Group.

With the government floating the idea of a new Care ISA that could be exempt from inheritance tax, the organisation calculated that the average ISA will pay for 39 weeks of care in the UK. However, the average stay in a care home is 130 weeks.

Commenting, Just Group group communications director Stephen Lowe said: “ISAs have been a popular way for people to save tax-efficiently for nearly 20 years but even over that timescale the average holder has not built up enough to pay for even a single year of care.

“With more than half (53%) of 45-54 year olds telling us they haven’t even thought about paying for care1, it’s difficult to imagine how a new Care ISA could suddenly spark the dramatic shift in savings that will be needed to meet these potentially huge residential care bills in the future.”

In the UK, the average ISA is worth £24,035 which would pay for about 39 weeks care compared to the average stay of 2.5 years for those entering a residential home. However, this value differs depending on region.

The average ISA value in the North East is £19,915, enough to cover the costs of 35 weeks care, while the North West has an average ISA size of £21,560 which could pay for 41 weeks of care. Despite the average value of an ISA being the highest in London (£25,982), high care costs in the capital mean that the money would only pay for 26 weeks.

“ISAs will only scratch the surface of the problem of how to pay for care, compared to using the wealth tied up in property which is far larger and more widely spread,” Lowe added.

“Only about four in 10 of the adult population has an ISA, falling to three in 10 in Northern Ireland. Fewer than one in 20 estates are taxed on death so the appeal of a tax break is limited.

“While most people have relatively modest care costs, the biggest problem is the minority who end up needing care for many years but cannot hope to save the six-figure sums to pay for it themselves.

“Government proposals would be better focusing in the short-term on how to incentivise people aged 50+ to use some of the many trillions tied up in their properties to support their later life care costs and focus longer term policy development on establishing solutions to pool risk so people can be protected from catastrophic care costs that destroy their life savings.”

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