We use cookies to allow us and selected partners to improve your experience and our advertising. By continuing to browse you consent to our use of cookies as per our policy which also explains how to change your preferences.

Close
Menu
Home care
Find out about care at home, adaptations and technology to help you stay independent in your own home for longer.
Financing care
Learn about funding options for home care, home adaptations and care homes, together with Attendance Allowance, gifting assets and Power of Attorney.
Housing options
Consider your options and learn about sheltered housing, retirement villages and care homes.
End of life
Guidance to help you through the emotional and practical steps of losing a loved one, from coping with bereavement to arranging a funeral.

Self-funding a care home

We explain how you can pay for your care, what happens if your money runs out and getting financial advice.
4 min read
In this article
How can I pay for a care home? What happens if I run out of money?

How can I pay for a care home?

There are state benefits and private ways to raise cash to help pay for your care.

 

From state benefits

 

Make sure you’re claiming all the benefits you are entitled to, as these can help with living expenses. If you’re aged 65 years and over, you may be able to claim:

  • Attendance Allowance, which isn’t means tested and is available to everyone who is paying for their place in a care home because it’s assessed on the level of care that is required.
  • Pension Credit, depending on your capital and income.
Which? Money Helpline
Get free one-to-one guidance on money matters relating to paying for care. Call Mon–Fri, 9am–5pm to speak to one of our experts.

 

If you’re assessed by the NHS as being eligible for NHS Continuing Healthcare, all the costs of your residential care will be paid for. Note, however, that there are very high eligibility criteria for this payment.

 

In a nursing home, there is a greater chance of you receiving NHS-funded Nursing Care. This money is paid directly to the care home and the amount should be deducted from your bill. However, if the care home quotes you a fee that doesn’t include nursing costs, it’s unlikely to pass it on.

 

From private income and capital

 

This might be from private pensions, investments or property. If you own your own home and you don’t want to sell it or you have a second property, you might want to consider letting it to get extra income. It’s a good way to increase income and reduce the rate at which savings are used up, but it’s important that you consider what would happen if there are periods when the property isn’t let. 

 

See the Which? Consumer Rights guide to letting a property for further information.

 

It might be tempting to give things away to reduce your capital and become eligible for local authority funding for care. However, it’s important to be aware that there are strict guidelines on giving away property.

 

Using an immediate needs annuity

Also known as an immediate needs care fee payment plan, this is a type of insurance policy that provides you with a regular income in exchange for an upfront lump sum investment, rather like a standard retirement annuity. Here's a list of the important aspects to be aware of.

 

  • There is no Income Tax when the annuity is paid directly to a care home. However, the charges a care home makes may rise faster than the payment from the annuity provider. To overcome this, there is a feature that enables the annuity to increase with time, which is something you might wish to discuss with the provider.
  • Insurers base their pricing on how long they expect someone moving into care is likely to live for. So while an immediate needs annuity brings peace of mind, there is also the risk of ‘wasted’ premiums if you, or the person you are arranging an annuity for, were to die prematurely. Of course, you may feel that the peace of mind that comes from knowing you won’t run out of money makes this a price worth paying.
  • The cost of an immediate needs annuity varies considerably between provider and also depends on your health and age.
  • You can insure against premature death by buying a guarantee, which returns 50% of the outlay on the early death of the person insured, but the cost can be prohibitive.

 

Seek financial advice

 

You should discuss your options with a specialist independent financial adviser who holds a CF8 qualification, which is the minimum qualification that an IFA advising on long-term care should have. You can take advice and discuss the options with a specialist accredited Later Life Adviser who is a fully listed Member of the Society of Later Life Advisers (SOLLA).

Society of Later Life Advisers (SOLLA)

By choosing an accredited member of the Society, you can be assured of someone with the expertise to best understand your needs to provide advice that is right for you and your family.

societyoflaterlifeadvisers.co.uk

For advice and information, call:

0333 202 0454

For more guidance on finding an IFA, see how to find a financial adviser in Which? Money.

What happens if I run out of money?

Once your assets decrease to £23,250, the local authority has a legal duty to contribute to the costs of your care following a reassessment of your needs (if you haven’t been assessed already, see our guidance on the needs assessment) together with a financial assessment.

 

As a part of this assessment, the local authority will consider the cost of care and, if they feel your needs could be met in a different home at a lower cost, they may recommend a move.

 

However, as well as showing that the new care home will meet your assessed eligible needs, the council also needs to carry out a risk assessment. The purpose of this is to check that such a move won’t affect your wellbeing, whether this is physical, social or mental.

 

Following these assessments, it might be the case that the local authority determines you should stay in your current care home. It should then increase its payment rate to cover the higher fees.

 

If a move to another care home becomes necessary, you might decide to look into third-party top-ups to enable your loved one to stay in the same care home. You would need to discuss this with the local authority.

Further reading

Paying for a care home

We explain options for paying for a care home, from local authority support to paying yourself, known as self-funding, ...

Care home fees

Find out how fees vary across the UK. There are also differences depending on the type of care home you are looking for ...

Last updated: 18 Sep 2018