Millions of UK workers risk retirement shortfall as care costs remain overlooked

Millions of UK workers could face financial difficulties in retirement due to inadequate planning for rising care costs, according to new research by Barnett Waddingham. The report, The At Retirement Reckoning, reveals that while over a third of respondents (36%) anticipate increased health and care costs during retirement, only 17% have factored potential care home expenses into their financial plans.

Mark Futcher, partner and head of DC at Barnett Waddingham, said: “There’s no doubt about it, the UK’s care crisis is deeper than we thought. Age UK estimates 2.6 million people aged 50+ in England are unable to access care. Now, our data suggests that millions more are unlikely to even be able to afford it when they reach retirement.”

The report highlights a significant gap between expectations and reality. While care costs can exceed £60,000 annually for residential care and £73,000 for nursing home care, respondents expected an average workplace pension income of just £20,435 per year—well below the levels required to cover such expenses.

Futcher added: “Very few people are even thinking about their health or care considerations when planning for their retirement. As a result, we’re at risk of a growing population with woefully inadequate pension savings that could buckle under pressure at even the slightest sign of illness in retirement.”

The findings further show that 43% of respondents have considered the possibility of serious illness during retirement but have not integrated it into their plans, while 28% have not thought about it at all. Regarding long-term care, 31% said they had not considered the prospect of needing care services during retirement.

Barnett Waddingham’s research underscores the need for urgent action to address the care funding gap and improve retirement outcomes. Futcher said: “While education, awareness and financial guidance will play an important part in fixing this problem, time and time again, the inadequacy of auto-enrolment workplace pension contributions is the main problem that must be resolved. With details of the Government’s highly-anticipated pensions review still to come, there’s an urgent need to fix our pension system to ensure better outcomes for retirees, whether they need care or not.”