It’s common to think that all carers are healthcare professionals, trained to provide assistance to those who need it. However, in many cases, care is provided informally by a spouse, sibling, friend, or child.
According to a report in Carers UK, the 2021 Census found that around 5 million people across the UK provide unpaid care to someone who cannot manage on their own due to age, illness, or disability.
When taking on a caring role, the financial strain can be significant. Income levels can drop, expenses can rise, and you may need to rethink your long-term plans, such as retirement or estate planning, to reflect your new situation.
Read on to discover four important reasons to update your financial plan if you’re supporting a loved one.
1. Your income and expenses may change
Becoming a carer can significantly reshape your household finances and relying on the same budget you had before caregiving may no longer be realistic.
You might need to reduce your hours or step away from work entirely. Or you may continue working while the person you’re caring for has had to stop, resulting in a drop in household income.
In addition to income changes, there may also be extra expenses such as medical bills, specialist transport, or household equipment that you need to buy, all of which could be quite costly.
Whatever your situation, it’s important to assess your budget when you become a caregiver to ensure you stay within your means and continue saving for your long-term goals.
A financial planner can help you create a tailored budget that incorporates both day-to-day needs and unexpected costs, while also ensuring your wider objectives remain on track.
They can help you explore options such as withdrawing from your emergency fund or using any protection policies you have in place. They can also alert you to other available allowances, such as a Council Tax reduction or carer’s benefits, that you might not know you’re eligible for.
2. Your retirement plans need protecting
Carers often find themselves sacrificing time and earnings, and those who take on the role in mid-life do so just as they are likely to be hitting their peak retirement saving years.
Any pause in employment or pension contributions can create a shortfall later on, and you may also miss out on making enough National Insurance contributions (NICs) to be eligible for the full State Pension.
Whether you’re unsure how a career break might impact your pension or wondering how to retire while continuing to provide support, a financial planner can help you model various scenarios and keep your long-term plans on track. This might involve looking at options such as continuing part-time work alongside your caring duties or downsizing and investing the profits.
A financial planner can also look at how your caregiving responsibilities might reshape your retirement goals. For example, you may no longer want to travel the world and would rather prioritise proximity to your family. Such decisions can considerably change your needs in retirement and a financial planner can help you adjust your plan accordingly.
3. You may need to adapt your estate plan
Providing ongoing care can have financial consequences, as you’ve read above.
To protect both your own estate and that of the person you’re caring for, it’s important to revisit your estate plans as your circumstances change. This might mean ensuring your wills accurately reflect your current wishes and that tools such as Lasting Powers of Attorney (LPAs) are in place to manage financial and healthcare decisions if needed.
There may also be steps you can take to help preserve and pass on wealth, such as giving gifts during your lifetime, using tax-efficient savings and investments, or setting up trusts to protect certain assets.
A financial planner can help you navigate tax rules to ensure you are compliant as well as efficient, and can support you to keep everything aligned with your wishes and long-term goals.
4. Peace of mind
Being a carer is demanding, and financial worries can add to the pressure.
A well-structured financial plan can ease some of this burden by giving you confidence about your finances. Knowing you’ve taken steps to secure your own future means you can focus on the person you’re caring for without constant stress about money.
A financial planner can help reduce uncertainty by creating a plan that ensures you have enough to cover your short-term needs while also providing for your long-term goals.
Get in touch
If you’re dealing with the pressures of caregiving and financial uncertainty, you don’t have to do it alone.
A financial planner can help you build a plan that supports both your loved one and yourself. To speak to a financial planner, get in touch.
Email admin@stonegatewealth.co.uk or call us on 01785 876222.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate estate planning, cashflow planning, tax planning, trusts, Lasting Powers of Attorney, or will writing.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
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