It still comes as an unwelcome surprise to many people that care in later life is not free – regardless of how much tax and national insurance you may have paid into the system. It can be an even bigger shock to realise that care often comes at an eye-watering price.
According to the latest available data*, the average cost of a care home in the UK rose to almost £35,000 a year in 2020 – and for those who need access to round-the-clock nursing care, the average price is closer to £50,000.
Of course, moving into a care home is not the only option for people who need extra support in later life. There are various other options, which can be more affordable, but the reality is that meeting the costs of care can be a major challenge.
The good news is that there are ways to get financial help – from local authority funding and state benefits to support from the NHS – but the system is notoriously complicated, especially for anyone who has no previous experience of arranging care.
To highlight some of the most important things you need to know, we asked our advisers on the Which? Money Helpline to share some of the most common questions they hear from our members about paying for care in later life.
1. How does the means test for care work?
You may have heard that only people whose wealth is below £23,350 can get financial support for care – but that threshold is just one part of how the process works.
Unlike NHS health care, which is funded by the government from general taxation, social care is the responsibility of your local authority.
The first step in seeking support is to request a free social care needs assessment. This will establish your needs, and determine whether they are great enough to qualify you for local authority support.
Next, the council will carry out a financial assessment (also known as the ‘social care means test’) to work out how much, if any, financial support you’re eligible for. The means test looks at your savings, assets and income. Only those whose means are below a certain threshold will get the maximum financial support.
Here are some key things to know about what is, and is not, included in the means test.
- Savings: if you have savings or other assets above the care funding threshold then you usually won’t qualify for local authority funding. The thresholds vary depending on where you live and what type of care you need. England has the lowest threshold in the UK at £23,250.
- Your home may be counted as one of your assets, but only if you need to go into a care home. If your partner, a relative who’s over 60 or disabled, or a dependent child still lives in your home, then it’s value will be disregarded. If you’re arranging care in your own home, then it also won’t be included in the means test.
- Income: The council will also look at your income (including benefits and pensions) to decide whether any of this could be used to pay for care. So even if your savings are below the means test threshold, you might still have to contribute a chunk of your income towards care costs. But this shouldn’t take your income below a basic level set by the government.
- Joint assets: the means test should treat you as an individual. If you’re married or living with a partner, only the income of the person needing care can be taken into account.
- Regional differences: The thresholds and rules vary in each part of the UK, which makes a big difference to what’s available. For example, in Scotland and Northern Ireland you can get free personal care, regardless of your financial circumstances. This can significantly reduce the bills (though you may still be charged for other support, like food or accommodation). And in Wales, the £50,000 threshold for residential care is more than twice as generous as that in England.
2. What is ‘deliberate deprivation of assets?’
It might be tempting to think about giving away some of your assets as you get older, to help you pass the means test and qualify for care funding. You might consider transferring ownership of your home to a family member, for example, or selling it to them for a nominal fee.
But it’s important to understand that you can’t intentionally give away assets to avoid care fees – this will be seen as a ‘deliberate deprivation of assets’.
Anything that looks like a deliberate attempt to reduce your assets could be classed as deliberate deprivation, and this can have major consequences. For example, if you’re deemed to have deliberately given away your home, you could end up having to pay for care but no longer having a property to fund it.
- Find out more: Gifting assets: what are the rules?
3. Can I get help from the NHS to pay for care?
In general, the NHS is not responsible for meeting social care needs. However, in some circumstances the NHS will fund the care of people who they have assessed as having complex or unpredictable medical needs.
NHS Continuing Healthcare (CHC) is a care package fully funded by the NHS for people with complex medical needs who require significant, ongoing health care outside of hospital. If you’re eligible, the NHS will arrange and pay for your care – usually, but not exclusively, in a care home.
The application process is complex – it looks at an individual’s specific needs rather than the condition they have – and it is notoriously difficult to qualify. But it’s always worth applying if you think you may be eligible.
If you don’t qualify for CHC, you might be entitled to NHS-Funded Nursing Care. This is a payment towards the cost of nursing care in a residential home for people who have been assessed as needing this level of care. From April 2021, the standard weekly rate in England is £187.60.
- Find out more: NHS funding for care
4. Should I consider a deferred payment scheme?
A deferred payment agreement (DPA) is a long-term loan you can request from your local authority if you own your home and need to move into residential care. The council will pay the care home fees and they won’t have to be repaid until you sell your home or after your death.
To qualify for a DPA, your savings must be below the care funding threshold. The council can charge interest on the loan, but the rates are low and set by the government.
If you’re eligible, it can be a good way to put care in place without having to sell the family home, but you’ll need to carry on paying any maintenance, insurance or mortgage costs on the property.
5. What’s the best way to cover the costs of care?
If you’re a self-funder paying all or most of your own care fees, the bills can be intimidating. There’s no escaping the fact that care is expensive, but there are strategies that can help you manage the costs.
The right approach for you will depend on your personal circumstances, but here are some options to consider:
- Combine existing income and assets A mix of pensions, savings and investments may cover a significant chunk of the care fees.
- State Benefits Find out what’s available and make sure you claim everything you’re entitled to, including pension credit, attendance allowance and council tax reductions. It can make a healthy difference to your finances.
- Rent out your property if you don’t like the idea of selling your home, but are happy to deal with areas such as property upkeep and managing tenants.
- Buy an immediate needs annuity These individually underwritten annuities pay care home fees for the rest of your life in exchange for a single, upfront premium. They’re typically expensive, but they do guarantee that fees are paid, while effectively ‘capping’ your expenditure.
- Unlock funds from your home If you’ll be receiving care at home, consider downsizing to a smaller property to boost your finances or reduce your expenses. You could also consider an equity release scheme to unlock some of the capital tied-up in your property. However, equity release can offer poor value for money, so you must take professional financial advice before pursuing this option.
Finally, taking steps to help you stay independent at home for longer will save money in the long run. There are various ways to approach this, from home adaptations to clever gadgets to help you stay independent.
Paying for care: a free guide from Which?
When it comes to paying for care in later life, there’s no one size that fits all. How much it costs to get the right support will depend on your individual needs, financial circumstances and where you live in the UK.
To help you navigate the options, Which? has created a free step-by-step guide to paying for care in later life. The guide provides straightforward information about the different funding options, how much care typically costs and how to look for financial support.
The Which? Money Helpline
Which? members can call our Money Helpline for free guidance on paying for care, as well as a range of other personal finance subjects, including loans, mortgages, pensions, savings, tax and investments.
Our money advisers can’t give you regulated financial advice, but they can offer Which? members free, personalised guidance as part of their membership.
Which? members can call the helpline on 029 2267 0001, on Monday to Friday, from 9am to 5pm.
* Care Homes for Older People, UK Market Report – LaingBuisson, January 2021