New research finds Brits believe citizens, not state, should pay for retirement

  • New research from Demos think tank finds that 57 per cent of the public believe that the individual has greater responsibility than the Government in meeting the costs of care in retirement, while only a third of the public believe the government should cover the cost of care
  • Yet, only 56 per cent of people are saving for retirement costs, and even more alarmingly, only five per cent are suitably financially prepared for covering possible care costs in later life. One in four Brits believe that social care is free.
  • Demos’ research found the majority of the public believe they will either ‘save up’ or ‘downsize’ to pay for retirement costs, but these options alone are unlikely to prove sufficient given current levels of long term saving and reluctance among older people to ‘downsize’ in order to cover care costs.
  • New polling commissioned for Demos’ research found that the public favour tax increases to cover the cost of care and either a capped care model, or an uncapped or means-tested model to support the poorest, but the majority are against a wholly tax-funded care system, free at the point of use.
  • Demos recommends that the Government create a co-payment system to cover the costs of care and – just as importantly – a strategy that helps people save their portion of the costs.

A new report from Demos think tank shows that more than 57 per cent of the public believe that the individual has greater responsibility than the Government in meeting the costs of their care. And yet, the research reveals that there is a gap between citizens’ expectations and the realities of the preparations they will be able to make for their futures.

This major research project which was supported by Legal and General, is based on an extensive review of the existing literature, a survey of 2,000 British people and focus groups with 40–69-year-olds across London, Birmingham and Leeds, examines how the public view their responsibilities in later life.

Consistent with existing research, Demos found an alarming lack of public awareness about the costs of social care – with 1 in 4 people believing that if they need care in the future they will receive these services free of charge, with a further 16% unsure of whether care is free or not. Unsurprisingly, Demos’ research also found this lack of awareness is met with poor preparation for these potential costs – with just 41% of people reporting taking steps to prepare for believing they are saving “to a great extent” for the costs of care in later life.

Demos found that the majority of people believe they will either ‘save-up’ or ‘down-size’ to a smaller property to cover the general costs of retirement and any care they might have to pay for, but at the same time, most admitted they were not saving and focus groups with the over 40s revealed an aversion to the prospect of moving in late life.  In reality, the national average pension pot per person in the UK in 2017 is £50,000, giving people around £2,500 per year in retirement. Residential care costs, by comparison, are around £30,000 per year. Saving 5 per cent – or even 10 per cent – of one’s salary is nowhere near enough to cover the costs.

The only viable alternative, Demos points out, is to use insurance and/or equity release products to enable modest savings to cover the costs of care, and to enable people to use housing equity without having to move. But poor awareness and reluctance to engage with financial services needs to be tackled if the Government hopes to help people realistically prepare for future care costs.

Demos’ polling and focus groups also reveal support for a modest tax increase to help fund care in later life, but the majority did not want to see a wholly tax-funded care system, free at the point of need. The public are also in favour of a safety net for the poorest and most vulnerable. Based on these findings, Demos recommends a co-payment approach which shares costs between the individual and state, but also one which enables individuals to better prepare and contribute to their portion of the costs.

Based on the findings of the report, Demos recommends the Government:

  • Use next year’s Care Green Paper and consultation to develop a white paper that lays out a copayment funding model as the public recognise they should take the lead in meeting their care costs, but want to see a safety net in place. Despite the recent announcement that the care cap would be dropped, this remains the most fully realised and concrete solution on the table, and its future should be reconsidered or a convincing alternative put forward.
  • Include in the white paper a series of measures to help working age and current older people prepare for paying for their care,, covering insurance and equity release options, with a strategy to work with the financial services sector to develop appropriate products that complement the copayment system, harnessing current innovations and underwriting or co-delivering products
  • To accompany the white paper and subsequent legislation develop a comprehensive public awareness-raising programme, akin to the pensions auto-enrolment campaign, with a strong message about the limitations of the role of the state in social care funding and the ways in which individuals can prepare for these costs

Personal reflections from participants in this research:

“Wherever possible people should always take responsibility for their own wellbeing, but some people genuinely can’t do it. No one should ever fall through the net. There has to be a safety net to catch everyone, no one should be struggling”. Male focus group participant, Birmingham

“The one issue I’ve got with pensions and state benefits is that they’re changing every other year. You know there’s no consistency so you can’t plan in advance”. Male focus group participant, Birmingham

“People don’t save now because you get nothing back on it. You might as well put it under your floorboards and you’ll earn more dust than it would interest”. Male focus group participant, Leeds

“I would downsize the property that I’m in now. I’d go half or quarter [size] in order to have that excess money to spend”. Female focus group participant, Birmingham

Commenting on the report’s findings, the author, Demos Director Claudia Wood said:

“It is interesting that while the public are more open to the prospect of having to take responsibility for retirement and care costs in later life, few still are making any effort to prepare financially. The government cannot allow the public to remain poorly informed and complacent about their need for care when they get older, how much it will cost, and how much they will need to pay.

Developing an awareness raising strategy – including around the financial products people will inevitably have to use to pay for care in later life – is just as important as deciding on a new care funding model itself. Without the former the latter will be doomed to fail”.

Commenting on the report’s findings, Steve Ellis, Managing Director at Legal & General Home Finance said:

“Legal & General’s social purpose drives us to find new ways of supporting our customers – that is why we are proud to have helped thousands of seniors to use Lifetime Mortgages to meet their goals. From preparing their homes with adaptations for older years, to supplementing monthly incomes, the Lifetime Mortgage is a secure and safe way for the senior generation to protect their freedom and independence. This new report shows the importance of thinking ahead and understanding how to prepare your finances should care be needed later in life”.

For more information about this research project, please contact:

Eva Charalambous – Communications Manager, Demos| 020 7367 4200 | (Out of Hours) 07804252211


Survey Methodology

Demos worked with Populus Data Solutions to administer a survey to 2,120 members of the general public. Participants were selected in order to achieve a representative sample across key demographic variables, including age, gender, region and social grade. The questionnaire consisted of 11 questions designed to gauge attitudes relating to the four key questions set out above.