Caring for loved ones in retirement

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Millions of people have caring responsibilities at some point in their lives and, for many, this can lead to huge financial strain. Caring for a loved one could be in your present or your future, so it’s something you should consider factoring into your financial plans. Find out what to think about and what kind of support is available. 

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One in eight adults in the UK are carers – that’s 6.5 million people. And caring responsibilities can fall to anyone at any age.

In fact, research from Age UK found that one in three of the UK over-65 population were providing care during the pandemic (before the pandemic this figure was one in six). Among these, they found that over four million unpaid carers were in their 80s or beyond. Meaning a staggering 23% of all over 80s were providing care.

Providing care in your retirement may not have been something you saw in your future, but the truth is it can affect anyone at any time. We’re generally living longer these days – which means caring responsibilities could easily fall to you when you reach retirement age and your parents, partner or family members become elderly or unwell. 

The importance of family

Our retirement study, Bringing retirement into focus: 2021, highlighted just how important caring for family is to people. The study found that 59% of people would be happy to spend less on themselves to help loved ones, with those aged 35-44 most likely (67%). 58% of people also agreed that caring for elders was very important to them. 

Of course, the instinct to help loved ones is clear - it’s natural that you’d want to help someone important to you if they’re in need. But with 61% of carers saying they’ve faced debt as a result of their responsibilities, it’s important to understand how caring could impact you financially in retirement and what you can do to prepare for it. Here’s what you can think about.

How you can prepare your pension savings?

When you turn 55 (or 57 from 2028) you can access your pension savings. So if you’re caring for someone, or start caring for someone, around this time, you may find that your pension savings become a useful source of income and you might end up relying on them quite heavily. 

For example, if you need to cut back on working hours or leave employment entirely to provide care, you might need to access your pension savings earlier than you’d planned to help top up your income. 

Or it may be that your expenses in retirement are higher than you expected once you factor in everything you need to help care for someone; fees for assisted living, medical appointments, higher household bills, specialist equipment, food, travel and so on. So perhaps the best thing to do is prepare for the unexpected.

First, work out how much you might need to cover the costs

Make sure you’re saving enough into your pension plan to cover not only the lifestyle you’d ideally like to have in retirement, but also the additional potential costs of unexpected life events like caring. 

There are many different types of care available, and it will depend on the situation, but Elder has a useful care funding calculator which could help you give a general idea of how much care could cost.

As for your pension savings, try our retirement tool to see how much you might need to fund your own lifestyle in retirement.

Next, work out how to get there

The good news is that your pension plan is designed to help you grow your money and get to the figure you’re looking for. It’s one of the most tax-efficient ways to save thanks to the tax benefits on your pension payments, which effectively means it costs you less to save more into your pension plan. You can find out more about how this works in our article How does pension tax relief work?

If you’ve got a workplace pension then it’s even easier to save more because your employer will be contributing to your plan too. They need to pay in at least 3% of your qualifying earnings and they may also offer matching schemes where they’ll pay in more if you do too – so it’s worth checking with your employer what pension benefits they offer.

On top of this, your pension savings are invested. Which means that they have the opportunity to grow over time thanks to compounding.

With all this in mind, it’s worth reviewing how much you’re paying in on a regular basis to see if you could afford to save in a little more. If you get a pay increase or a bonus, for example, you could consider using the extra funds to pay in a lump sum or increase your regular payments. Every little helps to give your plan a boost and topping up your pension payments when you can is a great habit to get into.

If you have Standard Life pension plan, you can top up your regular payments or make a single payment online or through our app.

Remember the value investments can go down as well as up and you may get back less than was paid in.

What if I need to start taking my pension savings before I’m ready to retire fully?

You can’t access your pension savings until you’re aged 55 (rising to 57 in 2028), so if you need to top up your income before you reach this age, you will need to rely on other savings or investments. Bear in mind that in some cases you could qualify for carers allowance as well, which could help to cover some of the costs.

If you do start taking your pension money, but want to keep working and saving into your pension plan, then there are a couple of things to think about. For starters, once you start taking taxable income from your pension plan, the amount you’re able to save into your pension plan in a tax year may reduce to £4,000. You can find out more from Can I take money from my pension plan at 55 and still work?

It’s also worth keeping in mind that how and when you take your pension money can affect how long your pension savings last - and remember they may need to last you longer than you think. Read our article to find out what to consider when it comes to making your retirement income last.

What about the State Pension?

To qualify for the State Pension you need to have 35 years’ worth of National Insurance (NI) contributions. This can be hard to do if you’ve had to stop working for a period of time or altogether to provide care. 

In some cases, carers can claim additional NI credits which can then count towards the State Pension. Find out if you’re eligible on Gov.uk. You might also be able to top up your NI record by paying voluntary NI contributions.

Where can I find support?

Caring for someone is a huge responsibility and it’s important to know where you can reach out to get the support you need. Here are a few resources that might help you get started.

• Carers Trust can help you find the right help and support in your area
• Carers UK offers help, advice and practical support for carers
• MoneyHelper has lots of useful information about the support services available to carers
• The NHS can give you an idea of the support and benefits for carers
• Gov.uk explains how carers allowance works and lets you check if you’re eligible
   

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The information here is based on our understanding in June 2022 and shouldn’t be taken as financial advice. If you are unsure, you should speak to a financial adviser and there is likely to be a charge for advice.

Laws and tax rules may change in the future and your own personal circumstances, including where you live in the UK, will have an impact on tax.

Standard Life accepts no responsibility for information on external websites. These are provided for general information.