Long term care Paying for yourself

Older woman in kitchen

Self-funders have to meet their own care costs without local government support.  

If your relative has more than the upper assets limit (£26,250 in Scotland, £23,250 in England and Northern Ireland, £24,000 in Wales), they are not eligible for help from the local authority and must pay their own care-home fees. 

As a 'self-funder', they are able to choose any residential care home they like. They might also be able to claim some benefits and allowances to help foot the bills.

Residents normally agree a contract directly with the care or nursing home. Your relative might be charged substantially more than the local authority pays however, because councils block book a sizeable number of places and can negotiate a cheaper price.

Long term care advice

The Which? Elderly Care  website gives free, independent and practical advice about caring for older people across the UK. Aimed at relatives, the site focuses on financing care, housing options and older people's needs, such as dealing with memory problems and accessing local authority and NHS care and support.  

Twelve-week disregard

If your relative's house is their main asset, and their savings and investments come to less than the upper assets limit (see above), they may not have to pay for their care-home place immediately. 

If they've been assessed as requiring a permanent place and their income doesn't cover the fees, the local authority must disregard the value of their home for the first 12 weeks of their care and help with payment as if they did not own property.

It will pay only up to its standard rate, and your relative will be expected to hand over all their income except £24.90 a week (2016-17) for personal expenses.

Deferred payments

After 12 weeks, local authorities run ‘deferred payment schemes’, where they can pay towards your relative's care-home fees, up to the standard rate, for as long as they live. 

Normally, your relative continues paying what they can from their income towards the cost. When they die, the local authority claims back the outstanding cost of this interest-free loan from the sale of your house.

Investments

If your relative has enough capital, from savings or the sale of their house, they could invest the money to generate an annual income. 

The challenge is to generate a return that is high enough to keep pace with fees – which tend to rise faster than inflation. A fundamental risk is that if their investments suffer a downturn they could start to eat into their capital and struggle to pay their fees.

Buying an annuity

There are financial products available for people who need to pay for care. These are known as immediate need annuities. Just like pension annuities, you pay a lump sum upfront in return for an income for life. Your relative can use this to pay for on-going care in a residential home.

The annuity income normally rises with inflation and allows your relative to meet the rising cost of care, rather than having it hanging over them as an open-ended commitment. The drawback is that they pay out a large sum upfront, which could be wasted if they die within a few months. It is possible to insure against this.

The cost varies considerably, depending on how old your relative is and their state of health. It also varies between providers.

You can buy these products only through specialist independent financial advisers, who should hold a CF8 qualification. These advisers should compare quotes from all providers before making a final recommendation.

Guarding an inheritance

One concern about paying for long-term care is that it can wipe out any inheritance your relative hoped to leave. An immediate need annuity can remove this anxiety.

A less certain way of ‘ring-fencing’ an inheritance is for your relative to try to reduce the size of their estate by dividing it up with a protective property trust or home protection plan. With these, you leave part of your estate to someone other than your spouse or civil partner, normally your children.

This could limit the amount of capital a surviving partner is assessed on if they need to go into long-term care. However, the local authority may decide that the move was a 'deliberate deprivation' of assets, designed to get round means testing, and refuse to overlook the transferred share.

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Last updated:

June 2016

Updated by:

Ian Robinson

Which? Limited (registered in England and Wales number 00677665) is an Introducer Appointed Representative of Which? Financial Services Limited (registered in England and Wales number 07239342). Which? Financial Services Limited is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited. Registered office: 2 Marylebone Road, London NW1 4DF.