BR report 2018

34 35 NUMBER OF PEOPLE LIVING TO 100 BY YEAR OF BIRTH AND SEX, UK, 2016 SOURCE: NATIONAL POPULATION PROJECTIONS, 2014 BASED PROJECTIONS AND PAST AND PROJECTED COHORT LIFE TABLES, ONS ANTICIPATING THE COST According to research from Aegon, only one in five people do not expect to need residential social care in their old age. 37 The research also showed that 80% of people think average time needing care is over three years, while 30% believe the average is more than five years. Steven Cameron, pensions director at Aegon UK, said: “It is particularly noteworthy that only one in five people said they do not think they will need residential social care in their old age. “This means most people need to be asking themselves how they will pay for it. The state will not pick up the full tab and failing to plan ahead could have serious implications for inheritance aspirations.” A CAP ON CARE COSTS The UK’s ageing population has caused a significant strain on councils, but has also generated controversy amongst the electorate. Addressing a conference of social workers in March, health and social care secretary, Jeremy Hunt, said: “The way that our current charging system operates is far from fair. This is particularly true for families faced with the randomness and unpredictability of care, and the punitive consequences that come from developing certain conditions over others. “If you develop dementia and require long-term residential care you are likely to have to use a significant chunk of your savings and the equity in your home to pay for that care. But if you require long- term treatment for cancer you won’t find anything like the same cost.” Asked directly if that meant there would be a cap on what any individual had to pay, he replied: “Yes.” 38 The Tory manifesto provoked fury at the last election, after it proposed making people meet all the costs of care until they had assets of less than £100,000. After a weekend of angry criticism, particularly from Tory candidates, Theresa May announced there would be a cap on the amount anyone would have to pay from their personal assets. Assuming this is the case, the level of this cap will give a useful indicator to financial planners when calculating how much a particular individual will need for care costs. “Estate planning is an area where advisers can add real value to clients. It isn’t something where they can easily indulge in a spot of ‘do it yourself ’.” — JESSICA FRANKS, BUSINESS LINEMANAGER, OCTOPUS INVESTMENTS “Each client scenario is unique, so an IHT calculator, such as www.IHTcalculator.com, can prove useful for financial planners, allowing them to input assumed growth rates for the value of different assets and calculate potential future IHT liabilities on the rising value of the estate.” — HENNY DOVLAND, SENIOR BUSINESS DEVELOPMENT MANAGER, TIME INVESTMENTS 37% OF OVER 55s STILL HAVEN’T MADE A WILL Over half (60%) of UK adults were without a will in 2017. Those aged 55 and over are three times more likely to have a will than those aged 18–34. However, even in this age group more than a third (37%) are still without one. 39 The high proportion of people who are yet to make will arrangements creates a significant opportunity for advisers in terms of income generation. If people are not making wills, then they almost certainly don’t have an estate plan in place. It is important for people to look at estate planning early on – in their 50s as opposed to their 70s – so that they are aware of all the options that are available to them, and don’t jeopardise any opportunities by leaving it too late. HOW BR CAN BE USED TO MAINTAIN CONTROL AND FLEXIBILITY One significant advantage of BR as an estate planning solution is that the assets still remain within the individual’s estate. This means that in the case of any unexpected emergency, the assets can be fully or partially liquidated – whether there is a need to fund long-term care or for spending in retirement. Of course, due to BR being unlisted securities, the ability to sell shares is likely to not be as quick as major market securities. However, BR products do have a good history of short-term liquidity, and AIM based BR shares will certainly be more liquid due to their quoted status. BR provider time horizons of liquidation of funds can range anywhere between seven days and six months, dependent on the provider’s liquidity provisions and market conditions. BR qualification for IHT exemption is also significantly quicker than gifting. BR assets only have to be held for a period of two years (as opposed to seven years for gifts and trusts). This is especially advantageous if estate planning has been left until later on. “37% of over 55 year olds still haven’t made a will” 16% 28% 63% UK ADULTS WITH A WILL 18-34 35-54 +55 1940 1936 1980 1950 1990 1960 2000 1970 2010 2016 140,000 120,000 100,000 80,000 60,000 40,000 20,000 0 MALES FEMALES 46,000 WOMEN AGED 60 TODAY EXPECTED TO SURVIVE TO 100 116,000 GIRLS AGED 10 TODAY EXPECTED TO SURVIVE TO 100 52,000 MEN AGED 40 TODAY EXPECTED TO SURVIVE TO 100