The government has announced a major shake-up of adult social care and how it’s funded, but care remains a huge financial challenge for many.
One of the key reforms proposed by the government was a cap on costs, which would mean no one in England would have to pay more than £86,000 over a lifetime for their care.
While this may ease the burden, care is still incredibly expensive and difficult to plan for. The cap may not cover food and accommodation costs, and it’s not clear whether the cap will apply in other parts of the UK.
When we surveyed 965 Which? members in July, seven in 10 of them said they were worried about affording care for themselves or a relative at some point in the next 10 years.
Here, we explain what determines who pays for care and what to do if that person is you.
Do I have to pay for care?
At present, you can get your care fully or partially funded by the government, but only if your savings are below a certain threshold.
In England or Northern Ireland, someone with more than £23,250 in savings won’t be eligible for any state support. In Scotland, the threshold is £28,750 and in Wales it’s £50,000.
From October 2023, under government plans, English thresholds will change: if you have less than £20,000 you won’t have to contribute; up to £100,000 you’ll receive some state support. You can read about the new reforms here.
More than half of the 216 Which? members we surveyed in January who had paid for long-term care funded it themselves. With the average cost of a care home at about £35,000 a year, this is a heavy financial burden to bear.
- Find out more: local authority funding for care homes
How long will my savings last?
We wanted to see how long someone’s savings would last if they go into care before the cap is introduced. Our calculations highlight the risk of running out of money in just a few years.
First, we looked at the average property value and savings pots of Which? members. We then factored in the average income for a member receiving a final salary and state pension and ran the numbers through our cost of care calculator.
Based on these figures, someone earning a weekly income of about £400, an Attendance Allowance worth £60 per week, savings of £75,000, a property worth £425,000, would run out of money and be eligible for state funding after four years and 14 weeks.
That’s if they were paying £672 a week for care – the national average cost of a care home, according to the most recent figures by business intelligence provider LaingBuisson.
- Find out more: self-funding a care home
Where you live matters
Unfortunately, care fees are something of a postcode lottery. In the North West, the average cost for a care home is £562 per week. But in the South East, it’s £840. In certain areas, the costs can go even higher – as high as £1,450 a week, if you were looking for a care home in the London Borough of Camden.
The map below shows how long it would take someone with the income and savings outlined above to become eligible for state funding in different parts of the UK. We’ve excluded Scotland and Wales because of their different thresholds for state funding.
- Find out more: the rising cost of a care home
‘We actually discussed selling our house’
Teresa (pictured) faced a tough decision when her aunt, who was living in a care home, began to run out of money.
‘The monthly shortfall between care home fees and her income ate into her savings,’ she told Which?. ‘She was about seven months away from her assets dropping below the threshold where we could get financial assistance from the local authority.’
It was explained to Teresa that the local authority wouldn’t pay the full cost of the care home her aunt was in, and where she was very happy.
Teresa’s options were either to put her aunt through a potentially stressful move into another, cheaper care home, or cover £1,300 a month in top-up fees.
‘This situation preyed on my mind so much that I actually discussed with my husband selling our own house and downsizing to fund my aunt’s care,’ said Teresa. ‘But she passed away before the money ran out, so we never had to make a decision.’
Can I avoid selling my home?
If you’re faced with the prospect of having to cover care costs yourself, an obvious solution is to sell your home.
But forfeiting the family home rather than leaving it to the next generation can be a hard pill to swallow. So what are the alternatives?
Letting it out
Renting out the property could help you cover a funding shortfall and also means you keep the house in the family.
But bear in mind that there will be repair costs, landlord insurance, agency fees and tax on the rental income. You’ll also need to have a contingency plan for any periods when the property isn’t let out. You can read more about becoming a landlord here.
If the council has assessed you as needing to be in a care home, you could apply for a deferred payment agreement. This is when the council agrees to pay the care fees of those who have less than £23,250 in other capital (in England – thresholds differ across the UK) but aren’t yet prepared to sell their property.
A deferred payment agreement allows you to delay selling your home until a later point when its value might have increased. But you will have to pay interest on the loan, as well as one-off charges and annual management charges.
If you’re still able to receive care at home – or if a family member continues to live there – you could release equity from the property. The older you are and the higher the value of your property, the larger the sum released will be.
With a lifetime mortgage – the most common type of equity release deal – you borrow a sum that doesn’t need to be paid off until you sell your home, move into care or die. With a lump sum lifetime mortgage, interest is rolled up and added to the lump sum at the end. Other lifetime mortgages allow you to make regular interest repayments.
One of the main disadvantages of equity release is that it will reduce – sometimes drastically – the inheritance your beneficiaries will receive.
- Find out more: is equity release right for you?
Is there any support for self-funders?
People with complex health needs can get care funded by the NHS Continuing Healthcare (CHC) scheme. This assessment doesn’t take into account your financial means. However, it’s notoriously difficult to qualify for support.
You could still get some funding from the NHS through NHS-funded Nursing Care (FNC), which will pay out £187.60 a week in England and differs across the UK. But this is only available for people in residential care or nursing homes who have been assessed as requiring care from a nurse.
Self-funders can still claim benefits as well. The Attendance Allowance, which helps pay for your personal care if you’ve reached pension age and have an illness or disability, pays £60 or £89.60 a week tax-free, depending on the level of care you need.
Those struggling to make ends meet should also check their eligibility for Pension Credit, housing benefit or a council tax reduction.
- Find out more: benefits and allowances for older people
Prepare your finances now
- Don’t wait for the means test – use our cost of care calculator to work out if you’re going to need to fund care for yourself or for a loved one. Then look at your own finances to see how long you could afford to pay for this care without any assistance.
If you think you’ll need help making your money last – or you’re considering equity release – you might want to consult a financial adviser. Ideally, they should be a member of the Society of Later Life Advisers (SOLLA) and hold Later Life Adviser Accreditation (LLAA).
Need guidance on financing later life care? Call the Which? Money Helpline. Our experts have more than 100 years’ financial services industry experience between them and can help you understand the different funding options available to you.
First featured in October’s Which? Money magazine
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