Almost two-fifths (37%) of UK adults over the age of 60 said they would use the state pension of just £179.60 per week to contribute toward care costs.
This is an increase of 16% compared to when Canada Life asked the same question last year, taking the total to 6.3 million people.
With the average cost of a care home estimated to be between £600 and £800 per week, these individuals would need to find an additional £400-£600 a week to afford care.
This funding gap is underpinned by a lack of planning and uncertainty, as 40% of over-60s do not know or have not planned how they will pay for their care needs in later life.
As many as one in six (17%) Brits say they have not thought this far ahead, and 15% expect the government to cover the costs of their care needs.
Equity release is becoming an increasingly popular option, with 8% of over-60s saying they would release equity from their home to cover care costs, up from 5% in 2020.
The findings also revealed an increased awareness and understanding of equity release and its uses, as only 4% said they were unaware of what equity release is.
Alice Watson, head of marketing, insurance at Canada Life, said: “As a society we continue to grapple with the issue of long-term care and who pays for it.
“Recent rumours suggested the Government is looking to increase national insurance to help fund the NHS and also pay for social care, but there is no doubt there is a big funding gap.
“These findings indicate that the over-60s have thought more about their long-term care needs in the last year, perhaps in part due to the pandemic.
“However, there are still a worrying number of people who haven’t and think their state pension will be enough to foot the bill.
“We must continue to encourage people to think about their wants and needs at the different stages of retirement and have these conversations early on, no matter how daunting they may be.
“Not only is it important to discuss plans with family members, but speaking to an adviser is a sensible first step.
“These professionals can help highlight how different financial products can be used to meet the needs of an ageing population, whether that be through their property, pension, or a blend of the two.”
Earlier this month, Canada Life introduced Lifestyle Select Options, allowing repayment contributions of up to 10% of the initial loan amount each year with contributions being exempt from early repayment charges.
