Families face £135k inheritance wipeout under Labour - thousands forced to sell homes

The two main political parties have done little to reassure families that they will be protected from social care costs, which can ravage wealth. The Conservatives have done nothing to solve the issue and it seems Labour doesn’t want to know either.

The average residential care home stay lasts two years, during which time families pay a staggering £135,360 on average, including nursing care costs.

That works out as £67,680 a year, leaving the average single pensioner with a £53,853 annual income shortfall, according to Interactive Investor.

These are terrifying numbers. They can wipe out family inheritances for those unlucky enough to need social care, say, after dementia or Alzheimer's.

Saving for this kind of cost is almost impossible, especially with care home fees expected to top £100,000 a year in 20 years.

A single 65-year-old retiree would need to set aside around £500 per month for 20 years to build a £200,000 pot of savings to pay for two years of care home costs at 85, assuming five percent annual investment growth.

That figure is on top of the £400,000 pot of retirement savings the average pensioner needs for a moderately comfortable retirement.

Most people have no chance of setting enough money aside. So they simply do nothing and hope for the best.

Alice Guy, head of pension and savings at Interactive Investor, said it is almost impossible to plan for care home costs. “They are hugely expensive and very difficult to self-fund for any length of time, unless you have extremely substantial assets. It’s rare to have enough pension income to cover the bulk of the costs.”

Not being able to afford care is one of the biggest worries for retirees, who would love to pass on wealth to loved ones but risk seeing it slip through their fingers, Guy said. “It takes a lifetime to build up wealth, but only a few years of expensive costs to see that rapidly dwindle.”

She added: “Paying for care home fees for two years is almost as expensive as buying a home, but it’s much less predictable and the costs come all at once.”

Care home residents with assets worth over £23,250 in England currently fund their own care, rising to £50,000 in Wales. The rules are due to change in October 2025, with the amount anyone will have to spend on personal care capped at £86,000 over their lifetime. This was originally a Tory plan, but Labour seems likely to stick with it.

However, this is even less generous than it sounds. Personal care means residential care and support, say, with washing, dressing, meals or managing health problems. It does not include other costs such as accommodation, food, energy bills and other consumables.

Even under the reforms, many care home residents will still be facing a substantial bill and will see their assets depleting rapidly, Guy said.

Despite rising pensioner incomes, the average pensioner is still far short of the amount needed to fund care home fee.

Estimates suggest that between 20,000 and 40,000 Britons are forced to sell family homes every year to cover social care costs.

However, couples may have some respite. “Your home may not be counted towards your assets if your partner is still living there,” she added.

Voters realise the danger as only one in eight in England say the Conservatives have delivered on pledge to “fix social care once and for all”.

Labour's only proposal is to pay social care workers more if it wins the election. It has not announced anything to protect families from the damage inflicted by social care costs.

The Tories have failed to fix social care. Now Labour looks set to fail, too.

Fewer than a quarter believe any governing party will deliver an effective later-life social care system in next five years, according to new research from retirement specialist Just Group.

Group communications director Stephen Lowe said trust between voters and political parties “lies in tatters” when it comes to social care reform. “Voters are fed up of broken promises and lofty policy pledges that are then delayed.”

He said this has led to a situation where almost four in 10 either do not trust any political party to deliver much-needed reforms or don’t know who to trust.

That seems unlikely to change after the election, either. Social care is expensive and there are no easy answers.

Labour is likely to keep kicking that down the road, too. As I've written before, it's a catastrophe and our politicians aren't doing anything about it.