Letter from the Founder: Funding Care in Retirement

A comment I see repeatedly on my pension videos goes something like this: spend it all before you need care, because if you have savings, the government will just take them to pay for it anyway.

I understand where it comes from. The feeling that you have worked and saved your whole life, only to have the system claw back everything at the end, is genuinely infuriating. And the mechanics of how care funding works in England do little to soften that feeling.

But I want to push back on something in that logic. Because the framing of “the government pays” is, I think, one of the most quietly misleading ideas in personal finance.

The government does not pay. You do.
When someone runs down their savings to qualify for council-funded care, the council does not conjure that money from thin air. Public spending on adult social care is approaching £30 billion a year in England alone. That money comes from taxation. It comes from income tax, council tax, and National Insurance paid by working-age people. It comes, in other words, from your children and your grandchildren.

The next generation is already carrying a significant tax burden. The Health Foundation estimates that an additional £8.3 billion will be required by 2032/33 just to keep adult social care pace with growing demand. That gap has to be filled somehow, and the people filling it will be the same working-age adults who are already trying to pay their own mortgages, raise their own children, and save for their own retirements.

When someone deliberately spends down their assets to avoid funding their own care, they are not beating the system. They are passing the bill to someone else. That someone else is, statistically, a younger person who is already stretched.

What the numbers actually look like

The average cost of residential care in the UK is now around £1,298 per week for self-funders, rising to £1,535 for nursing care. That is roughly £67,000 to £80,000 per year.

The average length of a long-term stay in a care home is around two to three years. So the typical total care cost for someone who needs residential care is somewhere between £130,000 and £240,000, depending on the level of care and where they live.

The threshold above which you are expected to fund your own care in England is £23,250 in total assets. That figure has not moved since 2010. The means-testing thresholds have been frozen for fifteen consecutive years, which means that as asset values and savings have risen with inflation, progressively more people are being pulled into self-funding their care each year.

So the system is already doing a reasonable job of extracting contributions from people who have savings, while protecting those who genuinely do not. The question worth asking is whether it is right to deliberately engineer yourself into the second group.

The argument for individual responsibility
I want to be honest that this is a contested area. Surveys consistently show that a majority of the public across all age groups and income levels view adult social care as a collective responsibility, and want additional funding raised through tax or mandatory insurance rather than out-of-pocket payments. That is a legitimate position, and I do not dismiss it.

The King’s Fund, one of the most respected health policy organisations in the UK, argues that funding should involve a partnership between the individual and the state, with the state bearing most of the cost but individuals contributing if they can afford to.
I think that is broadly right. But there is a gap between contributing if you can afford to and deliberately spending down your assets so that you cannot.

The King’s Fund also makes the point that people’s need for care varies hugely and unpredictably. Some people will need very little. Others will develop dementia and need years of residential care. The uncertainty makes it genuinely difficult for individuals to plan. I accept that. Care costs are one of the few financial risks that are almost impossible to self-insure against individually, because you cannot know in advance whether you will need nothing or everything.

But that uncertainty cuts both ways. It is also the reason that spending your pension quickly on the assumption that you will need expensive care is not the rational strategy it might appear to be. You might not need residential care at all. Only around 21% of people in England die in a care home. The majority of people either die at home, in hospital, or in a hospice, without ever needing the residential care they feared would drain their savings.

The deprivation of assets problem
There is one more thing worth knowing. If you deliberately give away assets or spend them down specifically to reduce your care costs, your local authority can treat you as still having them. This is known as deprivation of assets. If the council believes you have done this, they may still include the savings you gave away in the means test, which could mean you have to self-fund your care despite no longer having the money to do so.

The rules here are not straightforward, and councils assess each case individually. But the principle is clear: the system is not designed to be gamed, and attempting to do so carries real risk.

What I actually think
I think the spend-it-all instinct comes from a very human place. People have worked hard, saved carefully, and they do not want to see everything they built disappear into a care system that feels unfair and opaque. That frustration is completely understandable.

But I think the framing is wrong. “The government will pay” is not a neutral outcome. It is a transfer from younger, working taxpayers to older, asset-holding retirees who chose not to use their assets. And I find it hard to look at a generation already navigating high housing costs, stagnant wages, and inadequate pension provision, and argue that they should also quietly absorb the care costs of people who could have contributed but chose not to.

My view, and I will flag it clearly as a view rather than a financial recommendation, is that the most responsible approach is to save what you can, plan for care costs as part of your retirement planning, and treat any assets left unused at the end as a gift to your children rather than a prize for outmanoeuvring the means test.

The money your children would have inherited if you had spent down your savings to qualify for council funding? That is also money they will never see. It just flows through the tax system instead of directly to them.

Antonia

____________________________________________________________________

This letter reflects editorial opinion and is not personal financial advice. Care funding rules vary across England, Scotland, Wales, and Northern Ireland. Individual circumstances vary significantly. If you are planning for care costs or concerned about how they might affect your estate, speaking to a regulated financial adviser with experience in later-life planning is strongly recommended.

Sources: Institute for Government Adult Social Care Performance Tracker 2025; Health Foundation social care funding analysis 2025; gov.uk Social Care Charging Circular 2025/26; Community Care (means-testing thresholds frozen 15 years, July 2025); carehome.co.uk average care costs 2026; Lidder Care average length of stay 2025; King’s Fund fixing social care analysis; Health Foundation public attitudes survey; gov.uk Palliative and End of Life Care Profiles January 2025.