How can I pay for a care home?
If you are self-funding a care home, there are various ways to raise funds to help pay for your care – from property and annuities to state benefits and NHS funding.
Private income, capital and property
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.
Take advantage of 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.
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.
In fact, the income from pensions, NHS-funded Nursing Care and Attendance Allowance pays a good chunk towards total costs. There is money available if you can find out how to claim it.
Use 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.
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 (in England – for thresholds in other parts of the UK, see our article on local authority funding), 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.
Explore the options for paying for a care home: local authority funding, paying for yourself or NHS support.
Care home fees vary across the UK. It also depends on the type of care home you are looking for and your care needs.
Government funding might be available to help pay for a care home. We explain the means test and other rules.