Will you have to pay for it, will you have to use your savings – and how much does care cost?
What help can I get towards my care costs?
We’ve already talked about the costs of care and whether or not you’ll have to pay for your care in the long-term. But if your health does begin to go downhill, there are other benefits that could become available to you including:
- Attendance Allowance (if you've reached State Pension age)
- Personal Independence Payment (if you've not reached State Pension age)
What's more, if you have complex ongoing health needs you may be eligible for NHS Continuing Care, meaning your care – whether at home or in a care home - will be funded totally by the NHS.
If you are not eligible for NHS Continuing Care but are in a residential home that provides nursing care, you may qualify for the Registered Nursing Care Contribution from the NHS. This is paid directly to the care home, but will reduce the amount you have to pay accordingly.
Your local authority or financial adviser should be able to help determine what assistance you can receive towards your costs of care.
What options do I have to pay for care?
If you have to pay for all or part of your care, don't panic. Depending on your circumstances, there are some other ways you could find the money for this. You may already have sources of income (such as a private or state pension), that covers some or all of your care costs or you make want to consider some of these options:
Draw down cash
You could simply place all your savings in a savings account and draw down as required. A risk with this approach is that you could run out of money, which may then affect your choices as to what level of care you receive and which care home you want to live in.
Renting out your home
You may want to consider renting out your property if you don't wish to sell it – certainly if you only require care for a limited period, or don't feel ready to sell it yet. Bear in mind though that you'll need to factor in tax, insurance costs, maintenance costs and letting fees when working out your potential income.
Deferred Payment Agreement
From April 2015, deferred payment agreements are available from all councils across England. Deferred payment agreements mean that if you move into a care home but don't want to sell your home in your lifetime, you're not forced to do so.
If you're eligible, the council will help to pay your care home bills on your behalf. You can delay repaying the council until you choose to sell your home (or use other assets to repay the debt) or until after your death. Councils may charge interest on the amount owed to them.
A final consideration is that there'll be a limit on the accumulated debt under this approach, linked to the value of the property.
Equity release schemes
You can use the equity in your home to fund your care, so you don't have to sell your house.
You may want release some equity to modify your home – with a stair lift, for example – helping you stay independent and in your own home for longer. Or, you may use it to contribute towards your care costs.
Equity release products are designed to be repaid upon death or upon entering long term care so are usually more appropriate for funding care at home. It's important to know that equity release will reduce the value of your estate.
If this interests you, the starting point is to read more about equity release in general.
Sell your home
If you sell your home, it's likely you'll release a large chunk of money that you can use to pay for your care home fees. This isn't always an easy option as you may be emotionally attached to your home, or wish to keep it as an inheritance for your family. It's also not an option for everyone, as there may not be enough equity in your home to cover your care costs.
Care funding plans or Immediate Needs Annuity (INA)
With care funding plans, like a conventional annuity, you pay a lump sum to an insurance company who then pay a guaranteed income for the rest of your life to help pay for your care costs. You can also choose for the income level to increase, to help offset the impact of inflation or increases in care costs.
Many people who choose this option like it because it helps protect them from the financial uncertainty associated with long term care costs and helps safeguard against running out of money and eroding their assets and their estate.
A downside to a care funding plan is that if you die shortly after taking one out, the cost may be more than the actual cost of care you would have incurred. To some extent this can be reduced by selecting options which ensure a minimum proportion of the cost of the plan will be paid out, to pay for care, or to your estate. Adding these options will increase the cost of the care funding plan.
The income payments on a care funding plan are normally paid directly to the care provider. If paid to a registered care provider, these plans also benefit from a favourable tax treatment. Find out more about care funding plans.
Overall, this can be a complex area, and at the beginning of your retirement, it may not be something you'll want to spend too much time thinking about.
But you never know whether you'll be able to discuss these options easily – if and when the time comes – because unfortunately, our health does deteriorate as we get older. That's why it's best to talk it through with your family to make your views known, sooner rather than later. This may be a good time to consider setting up a Lasting Power of Attorney, with that in mind. And as always, you should seek professional financial advice to explore your options further.