PAYING FOR CARE in 2020

This page was last updated on 1 November 2020

Paying for care

If you feel that you need extra support around the house, or that you need to move into a residential care home,  then you may be worried about how you are going to pay for care.

Unfortunately, social care is not cheap. While the exact cost of your care will depend on your personal care needs, care fees can easily run in excess of £100,000.

The purpose of this article is to help you to understand the different funding options available when it comes to paying for long-term care.

Topics that you will find covered on this page

Do you have to pay for a care home?

Yes, in many circumstances you do. The cost of care depends on a number of factors, such as:

  • Whereabouts in the country you live
  • The quality of the care provider
  • Your particular care needs

Your care costs will also vary according to whether you are paying for care in your own home or paying for care in a residential or nursing home.

In 2019, the average cost of care homes in the UK was £33,852 per year. When the cost of nursing care was included, this rose to over £47,320 a year. 

The amount that you need to pay for care in your own home will depend on the level of support that you need. The average rate for home care fees in the UK is approximately £18 per hour. That means that if you need 14 hours of care per week, which is 2 hours per day, then you will likely be paying over £1000 a month or £12,000 per year.

One other area to look at is whether it is possible to avoid care home fees.  

What is the threshold for paying for care?

It may come as a surprise to learn that most people are responsible for paying the full cost of their own care.

It is usually your responsibility to cover the entire cost of your social care if the valuation of your personal assets exceeds the national threshold.

In England and Northern Ireland, this is £23,250. In Wales, the amount is £24,000. Finally, in Scotland, the amount is £27,250.

Your assets include your savings, income, any other financial capital including investments, and also your property if you are planning on going into residential care. 

How much savings can you have before you have to pay for care?

If the value of your savings lies below the threshold, then your local authority may be able to provide some help towards the costs of your care.

In order to determine how much financial support you are eligible for, the local council or authorities will arrange for you to undergo a financial assessment or means test. You can find out more about this means test here.

In some cases, your local council may be prepared to pay for a care home, but not necessarily the full cost of your preferred care home.

If this is the case, a third party such as a friend or relative may wish to pay care home top-up fees. This is a contribution made to cover the differences between what the council is offering to pay and your total care home fees.

7 ways to pay for your care costs

If you are self-funding your social care, then there a number of options available to you.

After reading the section below, it may be a good idea to discuss the different ways of funding care with your family, partner, or another person who you trust.

You should also seek expert advice from specialist advisers in order to make sure you choose the option which is best for you.

Here is a video from UK Care Guide on the different ways that you can pay for your care.

1 – Using a Deferred Payment Scheme

Even if a financial assessment finds that you do not qualify for financial support from your local council, you may still be eligible for a deferred payment scheme.

A deferred payment scheme is a loan provided by local councils to help towards the cost of care. Typically, the loan has a fixed interest rate and is secured against your home.

You will only be able to use a deferred payment scheme if you plan on living in a care home and you own property or other capital that the local council can use as security.  

You will need to sign an agreement with the local council committing to repaying the loan, the interest, and any administration charges involved in selling your home upon death.

It is also worth knowing that you can usually rent out your property in addition to using a deferred payment scheme when paying for care homes.

2 – Using Rental Income

If you are planning on moving into new accommodation, then you might consider renting out your home to help you pay care home fees.

Of course, this will only be possible if your finances are such that you are in the fortunate position of not needing to sell your home in order to cover your care home costs.

When calculating how much you can make from renting out your home, remember to factor in any periods when your property will be without a tenant, the ongoing costs of home maintenance, and any tax that you will need to pay on your rental income.

You should also seek advice about ways to cope with the responsibilities of becoming a landlord.

"A care annuity is a type of insurance policy. In exchange for one lump-sum payment, you will receive a guaranteed regular income to put towards the cost of your care."

3 – Using a Care Annuity

A care annuity is a type of insurance policy. In exchange for one lump-sum payment, you will receive a guaranteed regular income to put towards the cost of your care. This income is also tax free if it is paid directly from your insurer to your care provider.

The amount of money that you will need to pay upfront will depend on a variety of factors, such as the amount of income you need, the current annuity rates, your health, life expectancy, and age.

When signing up to use a care annuity, you should make sure your payment agreement includes a capital protection clause. This will ensure that your family estate is able to receive part of your lump-sum payment back if your period of care ends up being shorter than expected.

4 – Using Equity Release

Equity release schemes allow you to access some of the value of your home without having to sell it.

Lifetime mortgages are one of the main types of equity release schemes and, since they do not require you to sell your home, they can be a great method of paying for home care.

Like a deferred payment scheme, a lifetime mortgage is a loan secured against your home. The loan may take the form of a cash lump-sum or a series of withdrawals depending on the type of lifetime mortgage you choose.

You will not need to make any monthly payments, unless you choose to do so by taking out a flexible plan. Rather, the loan and any interest which has accrued will be paid off after your death when the property is sold.

In order to qualify for a lifetime mortgage, you must own a property in the UK worth more than £70,000 and you must not have any other debts secured against your home.

Since all equity release schemes carry some risk, it is important that you speak to specialist advisers in order to decide whether this choice is right for you.  

5 – Using Investment Income

Depending on your finances, you may be able to cover part of your care fees with your income from investments.

Of course, in order to receive an investment income, you will need to invest your capital. For example, if you are moving into a residential care setting, then you might consider selling your property and investing the money.

Since how much money you can make on your investments depends heavily on the market, it is usually best to invest in low to medium risk government bonds, corporate bonds, and ETFs.  However, where you invest depends on your personal attitude to taking a risk with your money

It is very important that you speak with specialist advisers in order to work out the best way to give your money the greatest impact.

6 – Using Your Pension and Income Drawdown

Most older people who are funding elderly care make use of their retirement savings or a pension drawdown.

A pension drawdown is a means of using your retirement savings to give you a regular income by reinvesting it in funds specifically designed for this purpose.

Paying for elderly care with a drawdown is only an option for you if you are over the age of fifty-five and have retirement savings which are either already in a drawdown product or which can be moved into a drawdown product.

Make sure you speak with financial advisers to get advice on whether a pension drawdown is the right choice for you before you make a commitment.

7 – UK Long-Term Care Insurance

In the UK, it is increasingly common for insurers to offer long-term care insurance packages.

These insurance packages typically pay out a £20,000 or £30,000 pot of money if you fail two or more activities of daily living. These daily activities include:

  • Washing
  • Dressing
  • Mobility
  • Continence

 

Your insurance premium will depend on a range of factors, such as your age, current state of wellbeing, and the amount you would like to be insured for.

Since care home fees are typically above £30,000 per year, long-term care insurance is better suited to paying for care at home. Your insurance will normally cover the cost of necessary home adaptations and for daily assistance from local care services.  

It is also possible to insure yourself against diseases that particularly affect older people, such as Parkinsons and dementia.

8 – Other Support for Self-Funding

Finally, you should be prepared to research into other forms of funding for elderly care which you may qualify for. After all, if you are a self-funder who is not eligible for support from the local council, you may still be entitled to other forms of financial support.

For example, you may be entitled to Attendance Allowance or Personal Independence Payment. If you already have a carer, then you may be eligible for Carer’s Allowance.

It is always a good idea to speak to your local council for advice on what other support is out there to help you cover at least part of your care fees.

Do you have to pay for care if have dementia?

You will not need to pay for your care home if you qualify for NHS Continued Healthcare Funding. In order to qualify, you will need to receive a needs assessment from a team of healthcare professionals.

The needs assessment will look at the complexity and intensity of your needs, as well as the danger you might be in if your needs aren’t properly met.

Whether you receive NHS funding depends on your individual health needs and whether you are being transferred to a care home straight from the hospital. Your eligibility does not depend on any particular condition, disability, or diagnosis. If you apply but are not offered it, you can always appeal.

Therefore, if you are diagnosed with dementia, you will not automatically receive NHS funding, but you may be eligible.

 

More information related to paying for care

Paying For Care

If you feel that you need extra support around the house, or that you need to move into a residential care home,  then you may be worried about how you are going to pay for care. Unfortunately, social care is not cheap. While the exact cost of your care will depend on your personal care needs, care fees can easily run in excess of £100,000.

Care Home Costs

Most people are responsible for paying for the full cost of their social care. You will be considered responsible for paying for care home fees if the valuation of your personal assets exceeds the national threshold. The savings threshold is different in England and Northern Ireland than it is in Wales or Scotland. Therefore, the are costs can also differ.

Home Care Costs

If you are thinking about receiving care and support at home, then you may be worried about how much your home care is going to cost. While it is true that the cost of home care is generally far less than the cost of residential care, home care can still amount to a considerable sum. Indeed, it is very common for the cost of in home care to run in excess of £13,000 per year.

Avoiding Care Home Fees

It may come as surprising news to learn that many people are responsible for paying their full care home costs. A person is responsible for funding their own care if the valuation of their personal assets exceeds the national threshold. 

Immediate Needs Care Annuity

An immediate care annuity is an option that can give you peace of mind. Essentially, it is an insurance policy that covers your care fees for the rest of your life by providing you with a guaranteed lifetime income. 

CHC Funding

NHS CHC stands for NHS continuing healthcare, with continuing meaning long term life care. Health and social care can be expensive, especially if you have no savings, income, or other finances. 

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