Key person dependencies in a family
Carers across the UK take many guises. They are from a vast array of backgrounds, across all ages, and with a wide variety of caring responsibilities. Likewise, those being cared for are a diverse group with a range of needs, requirements, and expectations.
Crucially, this cohort is expected to continue to grow over the coming years, a key factor being the growing older demographic in the UK. In 2022, there were around 12.7 million people aged 65 or over in the UK, making up 19% of the population. According to ONS projections, by 2072 this could rise to 22.1 million people, or 27% of the population1.
Whether caring for children, parents, a partner, or another family member, each brings added complexity to family financial planning, even for those that are on the surface pretty financially resilient. Advisers will need to play a key role in helping clients avoid complacency, navigate the choices ahead, and put the necessary support in place to mitigate those challenges that will likely lie ahead.
The caring conundrum
The number of people on whose shoulders ‘caring’ sits is significant, and typically under appreciated. Recent estimates say that there are 1.5 million adults in the UK who meet the definition of being a carer for an older relative and dependent children. There’s also a notable gender split, with women being 36% more likely to be unpaid carers and 34% more likely to be providing unpaid childcare2.
The financial impact, let alone the emotional one, is weighty. The data shows around one in five adults (20%) between 40-59 provide financial support to their parents for healthcare, home modifications, and everyday finances2.
But it’s not just people of working age. A significant proportion (37%) of retirees are in fact financially supporting their children or grandchildren in some way. What’s particularly worrying is that they seem to not have incorporated this into their financial planning - of this group, almost one in five (17%) say they don’t know if they have the provisions to be actually doing this3. This should set alarm bells ringing.
UK vulnerability
It’s also evident that UK households are worryingly vulnerable, far too susceptible to financial challenges posed by shorter, medium, and longer-term ill-health.
We know only too well that households simply don’t have the financial resilience to navigate financial storms. Almost three quarters (73%) of people wouldn't be able to support themselves or their household financially after a year if unable to work, and the average household is just 19 days from the breadline4.
This squeeze is felt all too regularly.
Between May-June 2023, there was an increase to almost 500k people going on long term sick leave, now 1 in 13 people. The number of days lost per worker because of sickness or injury is 5.7 days, a figure that increases among women and with age5. Around one in four people in England will experience a mental health condition each year6.
So what happens?
Often heavily reliant on a single person, there’s a risk of a single point of failure in the caring structure - should something occur that either placed restrictions on the carers’ ability to do the role, or took them out of the picture all together, the carefully, precariously balanced system risks collapse.
Furthermore, the carer’s ability to recover properly can be significantly inhibited if, for example, they feel they need to rush back into action.
The protection opportunity
For those with caring responsibilities, the implications of being unable to continue with those responsibilities are vast. So how can this conundrum be solved?
There’s a bigger challenge around getting the UK to save more. But in the here and now, there are a host of financial products that can give the reassurance and financial support required. Being able to ease that burden, providing reassurance and a demonstrable safety net is invaluable to all concerned.
It could be the case that some of the more traditional income protection products would meet the requirements. But more modern products such as Family Income Benefit (FIB) are specifically designed for such situations - a form of term assurance cover which pays a regular, tax-free income from the time of the claim to the end of the plan term. FIB is an easy way for a client to provide their family with an income rather than a lump sum if they die.
FIB policies provide excellent value for money and can help cover costs associated with long-term care and help with maintaining payment of household bills.
Anticipation and understanding
Central to advisers being able to deliver value to clients in this area and ease the burden of uncertainty is understanding the pressures, worries, and needs of individual families. It’s also crucial that they can confidently identify those situations that might make a client vulnerable.
This begins with frank conversations, but needs to continue with regular touch points over time to make sure that possible challenges are pinpointed and that there’s ample opportunity to reflect changes in circumstances in financial planning and products.
While carers often appear superhuman, they face health challenges just like everybody else. Recognising that and putting support in place for their wellbeing will bring benefits to them - but also those that they care for too.
1Source: HoC library The UK’s changing population
2Source: Internal source The Squeezed Middle Fact Find October 2023
3 Source: Scottish Widows Retirement Report
4 Source: Halifax (LBG) IWD_Protection_Survey_13.02.24
5 Source: Labour Force Survey, ONS April 2023 Sickness absence in the UK labour market - Office for National Statistics
6 Source: Mind.org.uk, The Big Mental Health Report 2024