The hidden financial cost of caring for a loved one

Andy Burnham has laid out his intentions to fight the next election on a platform of free social care at the point of use. It’s a difficult move politically, because it has immediately sparked speculation as to how it would be funded and whether there could be new taxes or some sort of change to the state pension triple lock.

However, such a move could dramatically change lives for the millions of people who have someone in their life who needs care. When we think about the cost of care, we tend to consider the expense of formal care, which is eye-watering. However, in 2023/24, an estimated 5.4 million people were informal carers, and for them, there’s every chance their responsibilities are costing them dear too.

Care takes a toll

Providing care can be incredibly hard work. Data released last week from the government’s latest survey of adult carers in England shows that over a third of carers look after someone for 100 hours a week or longer (34.7%), which makes it difficult to work full-time alongside this. Only 9% of those who care are in full-time paid work, while 10.1% work part-time. And while three-in-five (60.1%) of them are retired, around one-in-five (19.5%) say they aren’t in work specifically because of their caring responsibilities.

For those caring for someone for a short period and changing their working patterns, this can have a significant impact on them and their finances, because they will see their income fall dramatically. For them, the full extent of the financial damage will depend on where in their career this period falls, and whether they are able to get back into work once their caring responsibilities have ended.

However, increasingly people are caring for much longer. Since this survey first ran in 2012/13, the proportion of carers looking after someone with dementia has risen from 33.2% to 38.7% in 2025/26, while the proportion of those caring for people with mental health conditions has risen from 17.7% to 23.7%. These conditions can require longer-term care for family members.

It’s one reason why over this period, the proportion of those caring for someone for 20 years or more has risen from 18.2% to 23.9%. The figures also show 17.7% have been caring for 10 to 20 years, which means more than two-in-five carers are looking after someone for over a decade. This can have a devastating impact on people’s finances. Almost half of carers (46.1%) say they face financial difficulties, and one-in-10 (9.9%) say they are in real financial trouble.

The cost of caring

Long periods out of work results in earning significantly less. Someone on the average annual salary of £39,039 for full-time employees could miss out on eyewatering levels of earnings if they have to stop work to care for someone.

Five years out of the workforce, assuming pay rises of 2% a year, would mean they miss out on £194,563 in earnings before tax and after pension contributions. Over 10 years that rises to £409,213, and over 20 years it rises to £908,535.

But it doesn’t end there, because it takes a massive toll on pensions too. If they had been automatically enrolled into their pension, they could be putting aside 8% of salary a year (split between them and their employer). If that grew at 5% a year after charges, those missed contributions would put a horrible dent in their pension savings too.

By the age of 67, missing the final five years of work could mean missed contributions of £13,757 and a pension pot that ends up £15,168 smaller.

If they missed the final 10 years of work, that rises to £29,205 in missed contributions, and a pot that’s £36,393 smaller. If they missed the last 20 years, it could mean £64,016 of missed contributions and a pension pot that’s £102,963 smaller. The result is that they could be significantly worse off in retirement, so they will be paying the price for caring for the rest of their lives.

When you factor in both the cost of lost earnings and missed pension contributions, someone who was unable to work for the final 20 years of their career could end up a staggering £1,011,498 million worse off.

What can you do?

There are no easy solutions when someone you love has care needs, which is why so many carers are struggling financially. If you’re caring for someone and you’re under the state pension age you should make sure you get the carer’s credit, which counts as one of the 35 years of National Insurance payments or credits towards your state pension.

You should automatically get this if you receive Carer’s Allowance (or Carer Support Payment in Scotland), but even if you don’t, you may still be eligible. You can apply and fill in the ‘Care Certificate’ part of the application form and get a health or social care professional to sign it.

You can also talk to the wider family. If you are caring for a parent and have siblings, there’s no reason why the burden should fall more heavily on one of you. Consider whether you can share the care, and if it doesn’t work, look at whether they could pay for some formal care, or provide some financial support to reflect the sacrifices you’re making.

At the very least, the cost of informal care should be part of the conversation. It’s easy for family members who aren’t at the sharp end to focus on the cost of formal care and want a cheaper solution. However, it might come down to a choice of spending the value in an elderly person’s £500,000 home or leaving you almost £1.1 million worse off thanks to lost wages and pension wealth, so the conversation needs to reflect the financial hit a carer will take.

It can also make a real difference to have a financial safety net to fall back on. We should all work to build our emergency savings to cover the cost of one to three years’ worth of essential spending in retirement, plus putting money aside in Stocks and shares ISAs during our lives for longer-term financial security. If we then reach older age and need care from our family, we can help protect them from facing the full financial consequences.