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How moving into a care home affects your pension and benefits

Read about the changes that might occur to your state pension, private pensions and other benefits if you move into a care home.

In this article
What happens to my benefits if I move into a care home? What benefits will stop if I move into a care home? What happens to my income if I get council funding for a care home? What happens to my benefits if I get NHS funding?
Deferred payment agreements and your income How will my benefits be affected if I go into hospital? Seek financial advice

What happens to my benefits if I move into a care home?

If you move into a care home, your eligibility for benefits may change. This will depend on whether you are paying for your own care (known as ‘self-funding’) or if a local authority is contributing to the cost of your care. The move can also affect the benefits that your partner or someone who is caring for you is entitled to receive.

If you are getting any of the following benefits when you move into a care home, the amount you receive won’t change.

Benefits you’ll still get in a care home

Once you are living in a care home, you and your partner will no longer be treated as a couple when it comes to benefit claims, so your partner may need to apply for benefits as a single person.

Be aware that if your local authority pays some or all of your care fees, you might have to contribute some of your benefits income towards the cost of your care. We explain this in more detail below.

What benefits will stop if I move into a care home?

Some benefits will stop or alter if you move into a care home.

If the local authority is paying some or all of your care home fees, the following disability benefits will stop after 28 days in a care home:

  • Attendance allowance
  • PIP daily living component
  • DLA care component 

If you come out of the care home (for example, if you go into hospital), even if only for a few days, Attendance Allowance payments will resume. They will be stopped again on your return to the care home.

These disability benefits will continue to be paid in full if you pay your own care home fees.

Carer’s Allowance will stop if you have been looking after someone else. Similarly, if someone has been receiving Carer’s Allowance because they’ve been looking after you, their benefit will stop. If you’re moving into a care home, you or your carer should contact the Carer’s Allowance Unit on 0800 731 0297.

Housing Benefit will also be stopped if you move into residential care.

What happens to my income if I get council funding for a care home?

Local authority care funding is means-tested. The council will contribute towards the cost of care if your capital is below certain thresholds. The thresholds vary depending on where you live in the UK:

Thresholds for residential care funding (2021-22)
  Lower threshold Upper threshold
England       £14,250 £23,250
N. Ireland       £14,250 £23,250
Scotland       £18,000 £28,750
Wales       n.a. £50,000

To assess your means, the local authority will look at the value of your home (if you own it and are living there on your own), savings and other assets, and your income, including pensions and benefits.

If you have a private pension when you move into a care home, half of this can be passed over to your spouse, if you have one. That half then won’t be taken into consideration for the means test.

If the local authority agrees to pay some or all of your care home fees, your income will be affected in the following ways:

  • You may have to contribute some of your income, including your state pension, towards the cost of your care.
  • You must, however, be allowed to keep a minimum weekly income, known as the Personal Expenses Allowance (or Minimum Income Amount, in Wales). In 2021-22 this is £24.90 a week in England, £27.19 in Northern Ireland, £29.30 in Scotland, and £32 in Wales.
  • Any Attendance Allowance and Carer’s Allowance payments will be stopped.
  • The mobility component of your PIP or DLA will continue if you’re in a residential care home, but will stop if you’re in a nursing home.

If your financial circumstances change significantly while you’re living in a care home – for example, if you inherit a large sum of money and the local authority will no longer pay for your care – you could become eligible to start receiving these benefits again. You would need to inform the local authority about a change to your financial situation.

What happens to my benefits if I get NHS funding?

In certain circumstances, the NHS will cover the cost of a care home through the NHS Continuing Healthcare (CHC) scheme. This funding isn’t means-tested, but if you are awarded CHC funding, you may have to use your state pension to contribute to the cost of your care. The same Personal Expenses Allowance described above will apply.

If you receive NHS-funded Nursing Care your right to get Attendance Allowance, PIP daily living component or DLA care component won’t be affected.

Deferred payment agreements and your income

If you move into a care home in England, Scotland or Wales and you don’t wish to sell your home, you can apply to your local council for a deferred payment agreement (DPA) to help pay your care home fees.

With a DPA, the local authority pays the care home fees, and you don’t have to repay them until you’ve sold your home or after your death.

Entering into a DPA may affect your income, including state pension and any private pensions. The local authority will carry out a financial assessment and unless you have a relatively low income, you will be expected to use part of your income to contribute to the care home costs. However, you are entitled to keep a ‘disposable income allowance’ of up to £144 per week.

You can still receive Attendance Allowance, PIP daily living component or DLA care component, but you’ll have to refund the local authority for this amount at the end of the agreement.

Any income contribution you make under the agreement reduces the amount you defer. This means there will be less to pay back when the agreement ends. For more information, including eligibility, see our article on deferred payment agreements.

How will my benefits be affected if I go into hospital?

You will continue to receive the following disability benefits until you’ve been in hospital for 28 days, when they will stop:

If you’re discharged but then return within 28 days, the number of days you were in hospital are added together. If they total more than 28 days, your benefits will be stopped until you return home or to a care home. 

The same principle applies if someone received Carers’ Allowance for looking after you.

It’s important to contact the relevant benefit office if you go into hospital. If you don’t report a hospital stay, you may have to pay back overpaid funds or your benefit could be stopped or reduced.

Seek financial advice

The ways in which paying for care affects your savings and income can be complicated, and it will depend on your personal circumstances. It’s always a good idea to seek advice from an independent financial adviser (IFA), such as a fully listed member of the Society of Later Life Advisers (SOLLA). This is especially true if you have complex financial arrangements. A good financial adviser can help you look at the big picture and make the right plan for your circumstances.

Which? members can call our Which? Money Helpline for guidance on any of the money matters covered in this article, as well as a range of other money issues. It’s part of our Which? memberships, so members can get guidance at no extra cost.

  • Call our Money Helpline Service on 029 2267 0001.
  • Not a member? Call us on 029 2267 0000 for more details of the different subscriptions we offer and what they cost, or visit which.co.uk.

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