No matter how independent you or your loved ones are, or want to be in the future, the time may come where later life will need to be considered. Clearly, the main considerations will centre around well-being and independence and there are a raft of considerations that need to be explored.
Meeting the cost of residential and nursing care in later life is a growing issue for many people in the UK. As life expectancy continues to lengthen, more of us can expect to require some form of long-term care.
That below is purely intended as guidance as all too often, the rules and practices change. You should also note that a Lifetime Mortgage will reduce the value of your estate, will not be suitable for everyone and may affect your entitlement to state benefits. And that the value of investments can fall as well as rise where you may get back less than you invested.
Long Term Care - What you need to know
Meeting the cost of residential and nursing care in old age is a growing issue for many people in the UK. As life expectancy continues to lengthen, more of us can expect to require some form of long term care.
How much will care cost?
Long-term care costs are high and industry trends suggest fees will continue to rise.
Care at home
Most of us would like to stay in our own homes – and local authorities try to enable this for as long as possible. The average cost of home care is £17.57 an hour . So just two hours of daily home care could amount to almost £250 per week. Live-in care can start at around £700 per week.
The cost of residential care can vary hugely by location and depending on whether an individual requires nursing or not. The table below shows average regional weekly care home costs around the UK for 2011/12 – with and without nursing care.
On average an individual can expect to pay around £27,144 a year for a residential care home, rising to over £38,000 if nursing is required.
Remember too that these are only the costs of residency and nursing. Costs that may still need to be met on top of a care home’s bill might include:
• Clothing, toiletries and personal items
• Trips and treats
• Telephone calls
If care is fully funded by the local authority, you are allowed to retain a Personal Expense Allowance to cover items like these. When looking for a home it is important to ascertain what is included in the fees and what isn’t.
People are living longer
The costs can end up being greater than originally anticipated. While the average life expectancy for an individual going into long term care is around 2 and a half years , this allows for severely sick and disabled people requiring nursing care admitted straight from hospital and therefore receiving state funding.
If we remove this group of care residents from the statistics, our experience suggests that the average stay in a care home for a self funder is actually more like 4 years, with a 1 in 8 chance of living over 7 years.
Here we show the average care home fees in the UK during the financial year of 2016-17. The fees are for privately and publicly-funded rooms combined in for-profit homes for older people and those with dementia (aged 65 plus) and divided by region. (Researched by LaingBuisson for their Care of older people UK market report, 28th edition, published May 2017.)
Average weekly care home fees around the UK 2016/17
(Source: Laing & Buisson, Care of Elderly People Report 2016)
Cost of nursing care/week
Cost of residential care/week
East of England
Yorkshire and Humber
Can my Local Authority help?
Qualifying for support
Local authorities and the NHS can help with the cost of care – but support is limited. State assistance with the cost of old-age care is means tested – primarily by imposing upper and lower capital limits on the value of your savings, property and other assets.
The limits across the country differ:
Capital limits for care funding 2018/19
So, if you live in England and your assets, including any property, are worth less than £14,250, care bills will be paid in full by the State. If they're worth more than £23,250, you will normally be expected to pay for your own care in full.
Value of assets over £14,250 limit
Divided by £250
Multiplied by £1
£15 to be paid per week
How can I pay for care?
Four key questions to ask yourself:
- Do you actually need to pay for care? Check what applies in your particular case.
- If you do have to pay for your care, what help is available from the state? In England, benefits up to £10,000 a year are available; in Scotland the figure is higher still.
- What might be the best way to meet care costs? Work out the shortfall between the cost and the available income, and then look at the capital available.
- What options are there that will help ensure money to pay for care doesn't run out?
If you do have to pay for all or some of your care, the options include:
You may receive sufficient income from pensions and existing savings and investments or rental income from your home to pay for your care.
In many cases, your family will be able to cover the cost for you.
This includes deposit accounts, ISAs and National Savings.
Long Term Care Plans
These are specialist insurance plans which, in return for a one-off lump sum payment, pay a guaranteed income for life. If income is paid direct to the care provider, it is tax-free*.
There are many possibilities here from bonds to shares.
*The rules governing taxation are subject to review and can change and will depend on individual circumstances.
How is my home taken into account?
Anyone with assets worth over £23,250, including property, is expected to meet the cost of care in full. Consequently, owning your home is one of the major reasons why people fail to qualify for support with the cost of care in old age.
Selling a much-loved home can be a highly emotional and difficult decision. But it is one that many people face each year to help pay for long-term care.
The authorities are wise to people attempting to rid themselves of property to reduce the value of their assets, and may ask detailed questions about current and past property ownership. Strategies such as bequeathing a property to offspring or putting it in trust may be viewed as a deliberate attempt to deprive yourself of capital and such assets may still be included in the means test at the local authority’s discretion.
When property is disregarded
A property can be excluded from the means test if it continues to be the home of someone else.
This can include:
- a spouse or partner;
- a relative who is over 60 or incapacitated;
- a minor under 18 who is dependent on the person in care;
- a separated lone partner with responsibility for a minor;
- in some circumstances, someone who gave up their own home to look after the person now going into care.
Deferred payments agreement
There may be some scope to come to an arrangement with the local authorities. Under a ‘deferred payments agreement’ the local authority may agree to help with the cost of care and will look to recoup these costs when the property is eventually sold.
The 12-week property disregard
Even if it is agreed that a property must be sold to help with the cost of care, homeowners are given a little breathing space.
Provided other assets fall below the upper capital limit of £23,250 (see Scotland and Wales limits above), the local authority will pay care home fees for up to 12 weeks to allow time to sell the property.
If the property still isn’t sold after 12 weeks, the local authority will move to a deferred payments agreement – as above.
Using property to fund care
There are a number of ways in which property could be used to help fund care.
As long as someone is still resident at the property, this enables funds to be released while still allowing the home to be retained.
Letting out property could deliver a regular income stream but owners need to be sure the net income after bills and management costs will be enough to cover care bills.
Once sold, the proceeds of the property could be invested to generate a regular return.
Some Care Plans can allow borrowing against the property, removing the pressure to sell quickly.
What is a Lasting Power of Attorney?
How to give others the legal power to make decisions on your behalf
Setting up a lasting power of attorney (LPA) gives someone authority to handle another person’s affairs if they are mentally or physically unable to do so themselves.
The Lasting Power of Attorney was introduced in 2007 to replace Enduring Power of Attorney (EPA). The key difference is that EPAs are not registered and did not cover personal welfare. It is possible to register an EPA provided it was signed before 1 October 2007 and to set up a Personal Welfare LPA to run alongside it.
An LPA is easy to set up. Without an LPA, even close family members may not have the authority to make decisions about your care in old age, your financial welfare – or your assets. Never assume a person will be able to act for you simply because they are an immediate family member.
Types of LPA
There are two types of LPA:
Property & Affairs
Enables the attorneys to make decisions about how your money is managed and your property and other financial affairs are handled.
Covers healthcare and welfare, including medical treatment, and where a person lives.
Each of these LPAs requires a separate application and a separate fee when it is formally registered. It is strongly advisable to arrange both kinds of LPA so your affairs are fully covered.
Putting the LPA into effect
Once drawn up, copies of the LPA can be kept by you, your solicitor and your attorneys. If the time comes that the LPA is required, your attorneys must register it with the Office of the Public Guardian. This requires completing an application form and a fee (currently £150). Separate fees are payable for each LPA, so consider how these fees would be funded.
Can I get more information?
Information on long-term care and choosing a nursing home
Benefits & allowance entitlements
Department for Work and Pensions
Government Public Services
Getting a care assessment
For an assessment of care needs for yourself or a relative, contact the local authority’s Adult Services department (NB must be the local authority for the person needing care).
Researching care services
The Care Quality Commission provides details and quality ratings for care services and care homes.
Support for carers
Carers UK provides information and advice for those looking after a relative and campaigns for change.
Equity Release Council provides a list of member companies that adhere to its code of conduct and can provide information and factsheets.
Inheritance tax, trusts & estate planning
To discuss tax liabilities on death or putting assets in trust, speak to a qualified solicitor who is a member of the Society of Trust and Estate Practitioners (STEP)
or Solicitors for the Elderly
Lasting Power of Attorney
To find a solicitor to help arrange Lasting Power of Attorney (LPA), contact the Law Society or Solicitors for the Elderly (details above)
 Laing & Buisson, Domiciliary care UK market report 2011
 Laing & Buisson, Care of Elderly People – UK Market Survey 2010
 Laing & Buisson, Care of Elderly People – UK Market Survey 2010
 PSSRU, Length of Stay in Care Homes, Jan 2011