Planning for care
What is care?
Care refers to the various services available to people who could benefit from assistance with looking after themselves, for example as a result of illness, disability or old age.
Care can be provided in a care home (residential care) or in your own home (domiciliary care).
How much does care cost?
Care can be expensive. The exact costs will depend on a number of things, including what services are being provided and where the care home is – there are big differences in price, from region to region.
Generally, care that's provided in your home costs less than being looked after in a care home, but this does depend on the level of support and assistance required. If care needs increase then this situation can be reversed, as it's very common for round-the-clock domiciliary care with live in support to cost more than a room in a care home.
It may be worthwhile contacting your local authority to see if they can help you, or perhaps talking to some private domiciliary care providers to discuss your care needs and associated costs.
Will the government pay for my care?
Unfortunately, it's likely you'll have to pay for some, if not all, of the care if you require it. Some costs may be paid for by the state, but this isn't always the case as they will only contribute to the costs of care if you have care needs that meet their 'eligibility criteria'. If not, all costs of care are your responsibility.
Also, much depends on how much capital you have – how much money you've saved, and what your house is worth.
All of your assets are considered, including your share of jointly held assets. However, if any of the following apply to you, your home won't be included as 'capital' when your care costs are calculated:
- If you have a spouse or partner still living in the property.
- If it is occupied by a relative more than 60 years of age.
- If a disabled relative lives in the property.
- If you are responsible for a child under 18 who still lives in the property.
- If you hold investments jointly with your spouse or partner, only half of these assets can be taken into account.
So if your savings, investments and equity in your home are more than the current limits, then yes, you will have to pay. The current limits (2021/22) are:
- England and Northern Ireland: £23,250
- Wales: £50,000 (residential care) or £24,000 (non-residential care)
- Scotland: £28,750
Also, in England or Northern Ireland, if your capital is between £14,250 and £23,250, you will have to pay towards the costs of your care. This is a contribution of £1 for every £250 of your savings between £14,250 and £23,250.
Only once you have spent down your assets and are left with less than £14,250 your care will be totally funded by the state.
In Scotland, things work in the same way although the lower limit is £18,000. Additionally, if you're over 65 and are assessed as needing care in a care home then you are eligible to claim personal care payments, and possibly also nursing care payments, to contribute towards the cost of your care (some people under 65 may also be eligible for nursing care payments) these are:
- £193.50 per week for personal care
- £87.10 per week for nursing care
- £280.60 per week for personal and nursing care
These amounts will only be paid once the council has a contract with the care home, and payments are usually made directly to your chosen care home.
In Wales it works slightly differently. It all depends on whether the care that you need is residential or non-residential. If you need residential care and you have assets above £50,000 you will be expected to fund it yourself. But if you need non-residential care, you only need to have assets above £24,000 before you are expected to fund your own care.
Can I get Local Authority support for care?
Local Authorities can help with the costs of care – but the financial support they provide is limited.
This support is means tested, so if you have assets or savings over a certain threshold, they will not contribute towards the cost of your care.
The maximum amount you can have in savings and capital and still receive financial support from a Local Authority differs depending on where you are in the UK. The current limits are as follows:
UK local authority capital and savings limits
|Upper limit||Lower limit|
|Wales||£50,000 (residential care) £24,000 (non-residential care)*||N/A|
Even if your savings and capital are less than these thresholds, your Local Authority will still expect you to use whatever income you receive to help cover the costs of your care.
So, if you live in England or Northern Ireland and have total savings and/or capital (including any property, investments or other assets) worth more than £23,250, you will normally be expected to pay your own care costs in full.
If you live in England or Northern Ireland and your savings and capital are worth less than £14,250, your Local Authority will make up any shortfall in the cost of your ‘eligible care’ for you.
However, if you live in England or Northern Ireland with savings and capital between £14,250 and £23,250, a sliding scale of support applies. This is based on you contributing £1 a week for every £250 of your savings/assets between the lower threshold and upper threshold.
In Scotland, it works in the same way, but the limits are slightly different. You may also be entitled to personal care or nursing payments. To qualify for personal care payments, you need to be over 65 and have been assessed as needing care in a care home. You don't necessarily need to be over 65 to qualify for nursing payments. These payments can be up to:
- £193.50 per week for personal care
- £87.10 per week for nursing care
- £280.60 per week for personal and nursing care
*In Wales it works slightly differently. It all depends on whether the care that you need is residential or non-residential. If you need residential care and you have assets above £50,000 you will be expected to fund it yourself. But if you need non-residential care, you only need to have assets above £24,000 before you are expected to fund your own care.
Whatever care you require, and whether or not you can afford to pay for it, your local authority has an obligation to conduct an assessment to determine your needs. If in doubt, the best thing to do is contact your local authority as well as speaking to your financial adviser.
What other 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.
How can I 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.