Why including later-life care in your retirement plans is crucial

Thinking about a time when you may need help looking after yourself and coping with everyday life might feel uncomfortable. Moreover, if you’re currently fit and healthy, planning financially for later-life care may not seem like a priority.

However, failing to do so could mean that you’re unable to fund the type and level of support you want and need as you get older.

According to Money Week, 60% of adults over 45 underestimate the cost of self-funding residential care. This lack of awareness could lead to a nasty shock later in life, or worse, you may have insufficient savings and investments to pay for the support you need.

Indeed, research by LV= reveals that 67% of UK adults are worried about the cost of later-life care, and 63% fear they will run out of money altogether.

Fortunately, careful financial planning could reduce this risk. Keep reading to learn more about the potential costs of later-life care in the UK, then find out why and how to include them in your retirement plan.

The cost of later-life care has increased in recent years

Figures published by Which? show that care home fees in the UK rose by almost a quarter between 2021/22 and 2025. This increase highlights the importance of preparing financially for later-life care.

The first step is to have a realistic picture of how much care might cost. This could help you make important retirement planning decisions and ensure you can afford appropriate support should the need arise.

According to carehome.co.uk, in 2026, residential care in the UK costs on average £1,298 a week, rising to £1,535 for nursing care.

However, costs vary widely depending on:

• Location
• The provider
• The level of care required
• Your financial situation

For example, weekly residential care costs in the East Midlands are £1,197 on average, and dementia nursing care is £1,415, compared to £1,548 and £1,767 respectively in London.

It’s also important to note that the amount you pay is means-tested. If you live in England or Northern Ireland and have savings and assets above £23,250 (2026/27), you’ll be treated as a self-funder and expected to pay the full cost of your care (Scotland and Wales have different thresholds).

Moreover, there is no maximum limit on care home fees. The former Conservative government had intended to introduce a lifetime cap in England, but the Labour government scrapped these plans when it came into power in July 2024.

However, if your capital falls below certain thresholds, you may be entitled to financial support from the government.

6 compelling reasons to include later-life care in your retirement plans

Factoring care costs into your financial plan now could offer valuable peace of mind. Here’s why:

1. Protect your home and assets

Ensuring that you have sufficient funds to cover your care costs could help you avoid forced or crisis-driven decisions, such as selling your home or other meaningful assets to pay your fees.

2. Reduce pressure on family and loved ones

Unexpected care costs can strain family finances and relationships, resulting in undue stress. In contrast, planning ahead ensures your expectations are clear and financial strategies are in place to support you. This could shield your loved ones from unnecessary pressure at a difficult time.

3. Maintain independence and choice

Building later-life care costs into your retirement plan allows you to choose the type and standard of care you receive. Failing to do so could increase your risk of running out of funds and seeing your options reduced to those the local authority is willing to fund.

4. Manage affordability and cash flow

Building a financial safety net for later-life care over time could ensure you have sufficient funds for your chosen support if the time comes without compromising your retirement lifestyle.

5. Make your wishes clear and legally protected

Documenting your preferences and discussing your wishes with family early could ensure you receive the care you want, even if you lose mental capacity. For example, registering a lasting power of attorney for health and finance ensures that one or more people you trust can make important decisions on your behalf if you’re no longer able to do so.

6. Preserve your legacy

Care-related spending may gradually erode the wealth you would otherwise have left as an inheritance to your children or other loved ones. Planning explicitly for later-life care could allow you to structure your estate so that some of it is earmarked for the support you need, while specific assets are preserved to be passed on to beneficiaries. This might include taking out insurance for care costs or setting up trusts.

Speak to us about including later-life care in your retirement plan

Deciding how you’d like to be looked after many years from now and calculating how much this could cost might feel overwhelming.

Your financial planner can help by modelling realistic care-cost scenarios, such as residential or in-home care, and showing how these costs could impact your savings, pensions, and investments over time.

They can then help you decide how much you need to build in your later-life care fund and factor this into your overall retirement plan. Preparing in this way could replace any concerns you have about unexpected care costs with confidence that you have a solid strategy in place that aligns with your broader life goals and preserves your independence.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, trusts, or Lasting Powers of Attorney.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.