Should you be including more in your retirement budget for healthcare?

In the UK, we’ve been in the fortunate position of having free healthcare for most things as a result of our National Health Service. As long as you retire after the age of 60, you don’t have to pay for prescriptions. We may have to pay for dentistry, opticians and a couple of other things, but we don’t expect to pay for health costs. This explains one of the major differences between spending patterns in retirement in the UK and the USA; in the USA, the typical retirement spending pattern is described as the “retirement spending smile” as this is what it looks like on a graph – spending starts high in the “go go” years, reduces as Americans move into the “slow go” years, but increases in the “no go” years as a result of their additional spending on healthcare – treatment and medicines.

In the UK, the NHS means that we don’t follow this pattern, but spending on healthcare has become more prevalent amongst our clients. This is understandable when waiting lists for medical procedures can be long; our clients are in the fortunate position of being able to pay.

A report (1) from the Institute of Fiscal Studies (an independent economic and statistical think tank) has looked at what might happen to NHS waiting lists over the next few years, and it makes for sobering reading. Its conclusions are:

  • The NHS elective waiting list in England was already growing before the COVID pandemic, as growth in demand for care outstripped growth in the service’s ability to provide it.
  • The elective waiting list has risen in every region and area of England, but there are large differences in the extent of the increase. Here in the South East, we are neither fortunate nor unfortunate – the North West, East of England and the Midlands have experienced bigger increases, whilst the South West, London, and the North East & Yorkshire have experienced smaller rises. The IFS reports that waiting lists in Sussex have increased by 72% since January 2020.
  • In the IFS’s most likely scenario, they anticipate that waiting lists will start to fall from the middle of this year, but in December 2027, they will still be longer than they were before the COVID pandemic.
  • In their optimistic scenario, waiting lists fall more quickly but would still be above pre-pandemic levels in December 2027.

What does this mean? It seems unlikely that NHS waiting lists will reduce, so, those who are in retirement might want to take action to allow them to skip the line, allowing them to make the most of their golden years. Financially, there is an implication, with hip replacements costing around £11,000, for example. The money does have to come from somewhere, and it will often make sense to include the potential cost of healthcare in a retirement spending plan. It seems unlikely that the retirement spending pattern in the UK will become a retirement spending smile, as in the USA, but many of us would like the option to be able to skip the line.

We can help you to consider how to factor this into your retirement income plan, and, for those who are already working, help you to work out how this might affect when you might retire.

  1. The past and future of NHS waiting lists in England.

Philip Wise |

Managing Director and Chartered Financial Planner

This guide is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.

Share This Article

More posts