Pension warning as hidden costs could mean you need an extra £200,000 in your pot for a 'comfortable retirement'​

With the population living longer, many people are forgetting to account for their health in later years.

The cost of nursing care is due to hit £200,000 for new retirees, new calculations from interactive investor have shown.

Despite rising pensioner incomes, the average pensioner income still falls far short of the amount needed to fund care home fees.

Many residents will be forced to sell their homes or other assets if they don't start planning earlier for this expense.

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Care home residents needing nursing care currently pay £135,360 on average for a two-year stay, which could rise to £201,128 in 20 years, assuming two per cent annual inflation.

Currently, the average single pensioner would have a £53,853 annual shortfall in income if they need nursing care in a care home, based on ONS average pensioner incomes, uprated for inflation.

Care home residents with assets worth over £23,250 currently fund their own care. But the rules are due to change in October 2025, with some costs capped at £86,000.

However, the cap only applies to personal care costs and not accommodation or other costs, so many care home residents will still be facing a substantial bill and will see their assets depleting rapidly.

Residents with assets between £20,000 to £100,000 will have their care home fees subsidised, but in many cases will still end up paying the majority of costs.

Alice Guy, head of pension and savings at interactive investor said: "If you’re planning ahead for retirement, then it’s useful to know more about how much care home fees could cost.

"The average retiree currently needs around £400,000 to fund a moderately comfortable retirement for 20 years, but that doesn’t include care home fees, which could add up to £200,000 to your costs, depending on the rules when the time comes.

"Someone with a modest wealth could still see their assets dwindle away, even with the new fee cap. It only applies to some of the costs and won’t kick in until you’ve already spent £86,000 on personal care."

Nursing care cost adds to the bill for care home fees because residents require higher levels of care.

Despite rising pensioner incomes, the average pensioner income still falls far short of the amount needed to fund care home fees so many residents will be forced to sell their homes or other assets. The rules mean that your home may not be counted towards your assets if your partner is still living there.

Someone who is currently 65 years old and retiring, could need around £200,000 to fund two years in a care home with nursing care by the time they reach their mid-80s.

Guy continued: "It’s almost impossible to plan for care home costs which are hugely expensive and very difficult to self-fund for any length of time unless you have extremely substantial assets. Care home fees have soared in recent years it’s rare to have enough pension income to cover the bulk of the costs.

"Not being able to afford care is one of the biggest worries for retirees, who would love to pass on wealth but sadly could see their plans slip through their fingers. It takes a lifetime to build up wealth, but only a few years of expensive costs to see that wealth rapidly dwindle.

"Paying for care home fees for two years is almost as expensive as buying a home, but it’s much less predictable and the costs come all at once. The average single pensioner would have an enormous £4,487 monthly shortfall in income when it comes to paying for nursing care in a residential care home."