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Planning Retirement Online

There's No Place Like Home


It is rare anyone has enough money to do everything they want. From the day we start work and even when we are living on pensions, few of us will ever be able to buy everything we fancy and in many cases everything we need.

This is certainly true about saving for old age. Who knows what might be ahead, but how much should we put away, and more to the point, how much can we spare from our daily income to set aside for future contingencies.

Prestige Nursing + Care, one of the country’s most established care agencies, has been looking at the costs of care homes; something many of us may have to face in the future, possibly for ageing parents and relatives and eventually even for ourselves. Prestige are particularly interested in this area because their speciality is in providing homecare services; from occasional relief care to 24 hour nursing in one’s own home ( When you look at the costs of care homes, and add to that the fact that most people much prefer to stay in their own homes if they can, it is easy to understand the increasing popularity of home care services.

In their recent report, Prestige Nursing + Care say that:

  • Average care home cost now exceeds £28,600 – leaving pensioners short by £282 per week.
  • Income gains of £785 in the last two years are eclipsed by £1,262 rise in care home costs.
  • Gap is equivalent to 104.9% of the average pensioner’s annual income.
  • Regional divide leaves South East pensioners facing a 71% higher shortfall than in North East.

The annual cost of a room in a care home has increased by £299 on average over the past year: 54% more than the average £194 income gain enjoyed by pensioners over the same period.

The average cost of a single room in a residential care home in the UK has risen to £28,666 a year, more than double the average pensioner’s income of £13,993. It leaves older people facing an income shortfall of £282 per week or £14,673 annually should they need to pay for residential care.

The gap between care costs and incomes amounts to 104.9% of the average pensioner’s earnings after tax from pensions, benefits, work and investments. This is a slight improvement from 105.6% in 2013 and 107.5% in 2012 as pensioner incomes have grown at a faster rate than care home costs.

Even so, pensioners’ annual income gains still add up to just £785 over the last two years while care home costs have risen by £1,262. As a result, the gap between incomes and care home costs has risen by £9 a week or £477 a year compared with 2012.





Annual cost of a care home


£28,367 (+3.5%)

£28,666 (+1.1%)

Annual pensioner income


£13,799 (+4.5%)

£13,993 (+1.4%)

Annual shortfall


£14,568 (+2.6%)

£14,673 (+0.7%)

Size of shortfall vs.
annual income




(Annual increase shown in brackets)


The South East remains the region with the most expensive care homes (averaging £32,760 per year) and has also experienced the biggest annual rise in care costs of any UK region (+£712 or +2.2%).

Although pensioners in the South East enjoy the highest average incomes (£15,184), theirs is the only region where pensioner incomes have fallen since 2013. Combined with rising costs, the loss of just £1 a week or £52 a year after tax still means that the South East’s elderly population has been hit by the biggest increase in the care cost vs. income gap, which has grown by 4.5% in the last year to £17,576 or £338 a week.

This shortfall is 71% higher than in the North East, where care home costs are the lowest (£24,648 – £8,112 lower than the South East) and where pensioners have also benefitted from a 2.6% increase in their income over the last year.

It means the annual shortfall between income and care costs in the North East has fallen by 3.4%: the biggest improvement of any UK region. Pensioners in the North East continue to experience the smallest care cost vs. income gap across the country, although they still face a shortfall of £10,000 if they need to fund residential care from their income.

Scotland is the only region to have seen a fall in the cost of a care home over the last year, with annual fees down by £17 on average to £27,768.


2014 annual cost of a care home

2014 annual pensioner income

Annual shortfall

East of England

£30,888 (+0.9%)

£14,924 (+0.0%)

£15,965 (+1.7%)

East Midlands

£25,220 (+2.0%)

£13,000 (+1.2%)

£12,220 (+2.9%)


£31,564 (+0.1%)

£15,080 (+0.7%)

£16,484 (-0.5%)

North East

£24,648 (+0.0%)

£14,404 (+2.6%)

£10,244 (-3.4%)

North West

£26,832 (+2.1%)

£13,676 (+3.1%)

£13,156 (+1.1%)


£27,768 (-0.1%)

£13,468 (+0.0%)

£14,300 (-0.1%)

South East

£32,760 (+2.2%)

£15,184 (-0.3%)

£17,576 (+4.5%)

South West

£31,512 (+0.5%)

£14,092 (+2.3%)

£17,420 (-0.9%)


£28,496 (+0.1%)

£13,312 (+2.8%)

£15,184 (-2.1%)

West Midlands

£27,664 (+1.9%)

£13,728 (+0.8%)

£13,936 (+3.0%)

Yorkshire and the Humber

£27,976 (+2.0%)

£13,052 (+2.9%)

£14,924 (+1.3%)


£28,666 (+1.1%)

£13,993 (+1.4%)

£14,674 (+0.7%)

(Annual increase shown in brackets)


Jonathan Bruce, Managing Director of Prestige Nursing + Care said:

“The fact that care home fees have grown at a slower rate than in previous years will be scant consolation for pensioners as the cost gap continues to widen in real terms. As council cuts drastically reduce eligibility for financial support in all but the most severe cases – with more cuts planned – many people are staring at a cavernous divide between their income in later life and the sums needed to pay for residential care.

“It is no surprise that older people often feel pressured into relying on family or selling their homes if the need for long term care becomes a reality. The widening gulf between costs and incomes threatens to place even more pressure on unpaid carers as pensioners struggle to make their incomes stretch to fund round-the-clock support.

“Care at home is often far more cost effective than residential care, allowing people to remain in the comfort of their own homes and use preventative measures to help maintain their independence. Promoting the role of domiciliary care is vital so that vulnerable people can access the support they need at a price they can afford.

“Of course, any form of care still comes at a cost and the issue of funding is further complicated by pension changes resulting from the Budget. There is a huge potential for confusion over how greater access to pension savings will impact on means-testing for care, and we need far more clarity to avoid leaving thousands of pensioners struggling to find the funds to pay for help.”

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