NEARLY a third of over-55s in the West Midlands (30%) believe they will need long-term care later in life but 36% say they cannot afford to pay for it, against UK averages of 32% and 38% respectively, according to research by the Equity Release Council.

The study not only exposes a shortfall in the ability of over-55s to cope financially with the scenario but also highlights a worrying lack of understanding about the cost of care.

A quarter (25%) expect their retirement income will cover most or all of the cost - versus 24% of the UK - but in reality the number of people financially prepared might be considerably less, with the Equity Release Council’s research highlighting that over-55s significantly underestimate the cost of long-term care.

The average cost of long-term residential care in the West Midlands is £27,154 a year but over-55s estimate it to be just £14,964 - a £12,190 shortfall. That 45% gap in estimated funds illustrates a lack of understanding of the true costs of care.

Data from Aviva’s Real Retirement Report reveal that the average pensioner income in the region is £19,992 a year, proving that the cost of residential care is not only higher than most people think - it is substantially higher than they can afford.

In addition, 81% of over-55s in the West Midlands confess to having made no plans at all for long-term care later in life, versus 85% of the UK.

Although nearly a fifth of over-55s in the West Midlands (19%) would consider selling their home and spending the proceeds to cover the cost of long-term care given the choice, the majority of over-55s (83%) in the region would prefer to receive care in the comfort of their own home, versus UK averages of 19% and 85% respectively.

The council’s research demonstrates that the average over-55 in the region owns a home worth £198,913, opening up the potential to access an average of £52,712 through an equity release plan.

More than half of over-55s in the West Midlands (62%) recognise their home as their biggest financial asset in retirement, versus 57% of the UK, so with such a significant amount tied up in property wealth, equity release offers a solution for many who are in need of long-term care but want to stay in their own home.

With the possible £52,712 that the average over-55 in the West Midlands could release, they could afford over five years of domiciliary care. That will be good news for the majority of over-55s in the region (83%) who would prefer long-term care to take place in the comfort of their own home.

The potential equity available can mean those in need of long-term care have other options available to them. The extra income can be used to help ease people through domiciliary care or pay for home modifications, putting off or even preventing the need to go into full-time care.

The Care Bill must ensure local authorities refer self-funders to regulated financial advice Within the Care Bill there is currently no indication that regulated financial advice will have to be recommended by local government to individuals when planning for long-term care, yet the council’s research reveals that only 18% of over-55s in the West Midlands trust their local authority or council to guide them on long-term care funding, versus 17% of the UK.

Nigel Waterson, the Equity Release Council chairman, said: “Although the ageing population means that the UK is finding itself confronted with a rather hefty bill for care costs in later life, there is an array of options available to those over the age of 55.

“The topic of care can be highly emotive and this can, in turn, make the decision-making process more difficult. It is, therefore, absolutely essential that consumers seek expert advice from regulated professionals in order to best assess their options as well as any long-term impact that may ensue.”