Paying for Elderly Care in 2019 

How Much Does Care Cost?

One of the first things that you need to think about is how much you expect care for you or a loved one to cost.

The cost of care will depend on a number of things including:

• Location
• Who pays for the care
• An individual’s care and support needs, including accommodation, meals, health care, heating and lighting, laundry, and so on
• The care provider, whether residential or home care
• The current demand for placement at a particular care home
• The Care Quality Commission rating of the care provider

To give you an idea of what you can work with, let’s explore care home fees across the country.

Keep in mind that this is just a rough estimate, it’s best to contact the relevant care provider to get accurate costs.

Who Pays For The Care Costs?

When seeking care for yourself or for a loved one, it’s important to be certain about costs and affordability, and fully understand what the state provides.

In the UK, there’s a national standard for charging care fees and determining who’s responsible for paying.

Generally, there are two threshold limits: the upper threshold and the lower threshold.

If the financial assessment shows that an individual’s capital is above the upper threshold, then they’ll be expected to cater for their social care. But if you are in the lower threshold, you’ll be means-tested to determine how much state help you qualify for. The NHS paying for care, through NHS Continued Healthcare funding is also another option that we’ll be discussing later.

1. Local Authority Funding

If it’s determined that you need care services, either at home or at a care home, and your capital is below £23,250 in England, or £25,250 in Scotland, or £23,750 in Wales, you’ll be eligible for financial support from your local authority.

People in this bracket may still have to contribute towards the cost of care though. You are only entitled to maximum support if your capital is below £14,250. Even so, you’ll still contribute your income less the £23.90 per week that should be retained for personal expenses.

The assessment is based on the financial details of the one receiving care and support. This means that couples are treated as individuals and the one needing social care is responsible for paying for care for the elderly in a care home if you have a partner.

The assessment takes into account your income, savings, and the value of your property if you are going into a care home.

2. Self-Funding

Approximately 25% of the millions of people who need adult social care actually qualify for state help.

If your capital is over £23,250, you must pay full fees. This is what is referred to as self-funding. Those receiving state help and have their capital between £14,250 and £23,250 may still be required to dip into their pockets to contribute towards the cost.

Even if you are self-funding, you may still be entitled to other forms of financial assistance such as Attendance Allowance, Personal Independence Payment, and Carer’s Allowance if you have a carer.

Seeking specialist advice from care fees advisors can be quite beneficial. You can find a list of care fees advisors in your local area here.

3. Using a Care Annuity

Using a care annuity, or an immediate care annuity as it is sometimes called, is a simple and tax-effective means of paying for elderly care in the home and in a nursing home.

It’s a type of insurance policy that provides a guaranteed regular income for life to pay for care in exchange for an upfront lump sum payment, from you, to the insurance provider.

The amount of money you pay upfront will depend on your age, health and life expectancy, the amount of income you need, and the current annuity rates. Be sure to include a capital protection clause, which allows one to get some of the lump sum payment back if the care period turns out to be shorter.

The payment from the insurer is also tax-free if it is paid directly to the care provider.

4. Using UK Long Term Care Insurance

Increasingly in the UK we are seeing insurers start to offer long term care insurance.

Long term care insurance is useful as it provides the money you need if you have to pay for care for either yourself or a loved one. Long term care insurance will typically cover the cost of assistance for those who need help to perform the basic activities of daily life such as getting out of bed, dressing, washing and going to the toilet.

In addition, this type of care insurance allows you to protect yourself against diseases such as dementia and Parkinsons.  If someone does get these, the insurance will cover the costs of care.

5 – Using Rental Income

If you are fortunate enough to not having to sell your house, then renting your home out, if you move to a care home could be a viable option.

This is a good idea if your family is keen on keeping the property or if a quick sale will bring in less the property’s full value. When renting out your home, factor in periods when the property will be vacant and the ongoing costs of home maintenance.

Income generated from tenants can therefore help meet care fees. Note that the income is taxable and you could end up paying capital gain tax if the property is sold. Therefore, using rental income should be an option only if the income generated can cater to any shortfall between income and your care fees. Also, be ready for the ongoing responsibility of being a landlord.

You can read more about the pros and cons of using rental income to pay for care here.

6 – Using Equity Release

By far, one of the most common ways to pay for care, if you are a home owner, is to use equity release.

This is when you can access some value of your home whilst you remain living in it. You can use the money for anything, including funding care. Equity release schemes, have some risks attached to them, so you should consider these alongside the numerous advantages.

The two main types of equity release schemes are lifetime mortgage and home reversion. It’s important to get advice from equity release specialists before using equity release.

Here is a short video that explains what equity release is and how it works.

You can call 0800 4640 806 and speak to a specialist straight away.

7. Using a Deferred Payment Scheme

Here, your local authority will pay for your care –up to a certain amount –for life.

This is where a loan is secured against your home at a fixed interest rate. You’ll have to sign a legal agreement with the local council agreeing to repay the amount owed, any added interests, and any annual administration charges once the home is sold upon death. Using a Deferred Payment scheme is only possible if you meet the following criteria:

• Live in or plan on living in a care home
• You own a home or any other asset that the local council can use as security
• Your total capital (excluding your home) is below the upper threshold

You might want to consider renting out your home. The income can be used to pay for care, thus reducing the local authority’s bill. If you are paying for care in a care home if you have a partner, this might not be an option for you as no one should be living in the property.

You can read more about deferred payment schemes here.

8 – Using Income from Investments

Using income from investments is another great way to pay for elderly care.

The first step is to arrange for your current assets to generate a steady income. For instance, if you are moving to a care home, you can sell your home and invest the money. Due to potentially adverse market conditions and the volatility of any investment, you can reduce risks by investing in low to medium risk investments such as government bonds or corporate bonds, dividend-paying stocks and ETFs, etc.

It’s a good idea to contact financial advisors to help you choose suitable long term investments.

9 – Using Savings

The good thing about using savings to fund care is that it’s readily accessible, it’s a low-risk investment, and no fees or charges are involved.

But how much savings can you have before paying for care for the elderly? Any amount of savings can be used to pay for care, but you should probably consider other funding options if you’re likely to run out of money.

You can read more about how you can use your savings income here.

10 – Using Your Pension and Income Drawdown

Many people that going in to care are likely to be receiving a pension and this is often what funds care for many.

Paying for care using your pension and income drawdown can be a great option only if you have other assets that can comfortably fund your retirement. To consider this funding option, you should be over 55 years and have pension savings that are already in a drawdown or can be moved into a drawdown product. This is also ideal if you don’t need your pension savings to provide income or fund other costs.

11 – Using NHS Continued Healthcare Funding

If your primary need is health need, then the NHS paying for care is another option to consider.

The eligibility requirements are, however, quite complicated and change from time to time. Using NHS continued healthcare funding (CHC) is only possible if you have complex ongoing healthcare needs. Also, if you’ve been discharged from a hospital into a care setting, you should be offered an assessment to determine if you qualify for this funding.

Here is a useful video that explains how CHC funding works.

12 – Using a Third Party Top Up

If you are eligible for support from the local authority, the council will offer a variety of care homes that meet their funding rates. If you choose to live in a more expensive home, then you should consider using third party top up to pay up the difference. Note that the money cant be paid from the person needing care.

The person making the payment could be a relative, friend, or a charitable organisation, but as we said, not yourself.

The only time you can top up your own fees is when you enter into a period which the authority doesn’t take your property’s value into account or if you have a deferred payment agreement as discussed earlier.

How to Avoid Paying For Care

It can be shocking to realise you need thousands of pounds to pay for care homes. For that reason, it’s only normal that people look for ways to protect their assets.

The biggest concern for many is how to avoid selling their home to pay for care and how much savings can you have before paying for care? The truth is this isn’t a simple question to answer. This text below will explain how you can possibly mitigate care costs rather than wholly avoiding them.

How to avoid paying for care is a very complex area. It’s best to consult a solicitor with expertise and experience in this area.

Ensure you get advice that’s tailored to your individual circumstances and backed up by a written report. Then, take as much time as possible to consider whether and how you wish to proceed. The being said, proper financial planning is the best way to get enough funds to meet care costs.

You can read more about the options around avoiding paying for care here.