Melanie Bien: The outlook is gloomy for Britain's pensioners

Iris Davies and her family will be breathing a sigh of relief this weekend after the squatters who moved into the elderly widow's home in Bath finally decided to leave of their own accord.

Iris Davies and her family will be breathing a sigh of relief this weekend after the squatters who moved into the elderly widow's home in Bath finally decided to leave of their own accord.

Mrs Davies's nephew has been forking out £2,500 a month to cover her care home fees but now her £195,000 house can be sold to pay for the long-term care (LTC) she needs for the rest of her days.

What makes this story so disturbing is not so much the fact that if the squatters hadn't decided themselves to leave, it would have taken months to remove them through the courts. That is bad enough.

But what is really depressing is that Mrs Davies is just the latest in a long line of elderly people who are being forced to sell their family homes to meet their nursing home costs. Around 70,000 people every year have no choice but to do this, according to figures from the Liberal Democrats.

This is because your local authority won't help out with your fees if you have more than £20,000 in savings or assets, including the value of your home. You have to pay for LTC yourself, which is why most people find themselves selling up to raise the necessary cash.

The average life expectancy of an elderly person once they enter a care home is just two years. But given that the cost of a nursing or residential home is around £26,000 a year, based on figures from the Nursing Home Care Fees Association, it doesn't take long to eat away at the proceeds of a house sale.

This can have a devastating effect on the inheritance the elderly person was planning to leave to their nearest and dearest. And anyone who knows an elderly person or two will know how important it is to them to leave as much they can. Not being able to do so is extremely distressing.

However, if you need to pay for LTC, alternatives to selling your property are few and far between, and growing ever more so. For example, LTC insurance, a pre-funded policy taken out by working people to cover the possible cost of having to go into a care home in later life, is no longer available. Skandia, the only remaining major provider of this type of insurance, announced last week that it is pulling out of the market.

Bupa, which used to be one of the largest providers of LTC insurance, also stopped offering these policies last month. And Norwich Union, PPP Lifetime Care and Scottish Widows all pulled out of the LTC insurance market earlier this year.

These insurers have withdrawn their products because sales have plummeted in recent years. Just one in four people over the age of 65 eventually need LTC, according to independent researchers Laing & Buisson, and most of us hope that we will be among the lucky three, so won't have to worry about paying for a care home. Nobody likes to dwell on the possibility that they will become old and infirm.

Even for those who did investigate LTC cover, the hefty insurance premiums charged made the idea of taking out a policy even more offputting. There are so many other demands on our wallets that persuading people to pay for something that might never happen is an extremely hard sell.

However, the Care Funding Bureau blames the Government for providers' decision to pull out of the LTC insurance market, saying it is unwilling to educate voters on who has to pay for their care and who can receive it for free. Many people still believe that the Government will help out financially if they require care, although this isn't going to be the reality for most of us.

There are alternatives to selling your house to fund LTC. For example, just before you have to enter a care home, you could purchase an impaired life annuity or an immediate needs annuity, which ensures that all care fees are covered for the rest of the policyholder's life. But there isn't enough awareness about such policies, with many people believing that selling up is the only answer.

What is vital is that an education process is put in place to promote awareness of the choices available. And also to make people realise that if they don't save for later life, whether it is for their pension or to fund nursing-home care, retirement may be anything but a golden age.

m.bien@independent.co.uk

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