The UK’s Ageing Population and the Need for Care

It’s a well-known fact that in the UK, provisions for funding care of the elderly are now inadequate and about to become a major crisis.  With people now living much longer and the numbers of people over 65 is expected to soar, matters can only worsen. Local Authority budgets are at breaking point and if this funding crisis is not addressed, they will become unable to meet their obligation to provide care for those unable to fund themselves.

Many care home operators, who depend on this local authority funding, now see the future profitability of their care home being only sustainable if they can increase the ratio of self-funding residents to those that are funded by the Local authority. Through the increased income from self-funders, they will be able to sustain and grow their businesses and creating an environment that supports the building of new care homes to meet the growing demand.

This approach has opened the door to investors, including those with reasonably modest amounts of capital, to purchase rooms within a care home and receive income from that investment. This is usually done through a type of buy to let arrangements with the care home operator, and typical investment amounts per room are usually in the range of £50,000 to £80,000. Essentially, the aim is for investors to take temporary ownership of a room and receive income from that investment while they hold that room but without having any involvement in the running of the business. This hands-off approach has attractions for investors who spend a lot of time overseas where they do not have the time to actively manage their investments.

This practice is now well established and investors can look to returns of 8% to 10% per annum on their investment while at the same time, knowing that their money is being used to provide essential care to those people who are no longer able to look after themselves.

The UK’s Ageing Population

The United Kingdoms’ population is now living much longer than was the norm in the recent past but the abilities of those over 65 to look after themselves into old age have not matched this extended lifespan. The inevitable outcome of this is that the UK urgently requires to substantially increase the availability of residential care home places to match the projected increase in demand.  So far, the political will, of all UK political parties, to fund these facilities has not materialised and may actually be beyond any government’s ability to do so.  Unless something is done in the very near future, this problem will become a major national crisis.

Current projections indicate that by 2030, there could be more than 20 million people aged over 65 living in the UK and statistics produced by the Office for National Statistics (ONS) show that in only 50 years time, that number is likely to increase by a further 8.6 million people. This would add a pensioner population roughly equal to the population of London, to what we have now.

These aging population statistics are a bit of a double-edged sword as they are being driven by steady improvements in life expectancy which results in many more people requiring long term care at some point in their life putting a strain on those responsible for administering that care. Counter to this, we are finding that young couples are having fewer children with the inevitable result that as they age, their children may not be there to support them, putting pressure on the state to facilitate the building of build new residential care homes to meet this increasing demand.

Will there be enough Care Homes to meet Future Demand?

In a recent study by the Lancet, it was indicated that by 2025 some 70,000 extra care home places will be needed to accommodate the growing demand. This study also showed that on average, women who are now over the age of 65 are likely to have to spend the last three years of their lives in care and for men, the last two and a half years of their life.

Recent research led by Newcastle University indicates that by 2035, only 10 years on from the above, that around 190,000 new care home places will be needed. That requires an additional 12,000 care home places per year to be built throughout that decade.

This research also found that these gains in life expectancy were resulting in more people living with higher levels of frailty, ultimately increasing demand for care home places.