Your Money
HARVEY JONES chats to experts to guide you and your family through what to expect
WHILE the NHS is free, millions of people who need care in later life will have to pay for it.
Only the really hard-up who have total assets of less than £14,250, including the value of their home, get all costs covered by the council.
So when a loved one needs care it’s an anxious time in so many ways.
As well as worrying about their wellbeing, you also face financial worries and have to navigate a very complex care and benefit system.
Luckily, there is plenty of help out there. Here’s where to start.
Planning for care isn’t easy
Few of us plan for later life care. The truth is we don’t want to think about it at all, but preparing isn’t easy.
Most won’t need care but those who do can face bills which can run into hundreds of thousands of pounds, says Stephen Lowe, director at retirement specialist Just Group.
The firm found three quarters of people who have arranged care found the system complex and were shocked by how expensive it is.
If you think a loved one is struggling with basic tasks such as washing, cooking or getting dressed, the first step is to contact your council.
Stephen says: “It will carry out a care needs assessment to decide how serious their challenges are and what care they need.” Social services will also produce a care plan and perform a means test looking at the person’s income and assets to see who pays.
Be aware of what care costs
If you need nursing home care, you’ll find it breathtakingly expensive. Typically, care homes charge £600 a week, whereas nursing homes cost an average of £800 a week, according to Age UK.
Over a year, that adds up to £31,200, or £41,600. You could easily spend more. Councils will only step in after you have used up nearly all of your savings plus the value of your home.
Once your total assets fall below the “upper capital limit” of £23,250 in England – the point below which you qualify for help – your local authority will offer partial assistance.
It will only grant full financial support once assets fall below the lower capital limit of £14,250. Even then it will take your income into account. Many families risk losing a fortune if an older member needs extended care, and in September the Government acted to help spare families “catastrophic costs”.
Boris Johnson announced a care cap, limiting what anyone in England will need to spend on care over their lifetime to a maximum £86,000. He also raised the upper capital limit from £23,250 to £100,000, while the lower capital limit climbs from £14,250 to £20,000. But the cap will only apply to care costs, and excludes living costs such as accommodation and food. These can easily add up to £1,000 a month and could race past £200,000 well before a family hits the £86,000 cap, Just Group calculates. Even worse, those daily living costs will continue even after families hit the £86,000 cap. And the care cap could make the system even more confusing, because councils will now have to track how much people are spending on personal care so they can calculate the cap accurately.
This will prove very tricky, and many families will not know where they stand as a result. Worse, the care reforms do not come into force until October this year and will not be backdated. Anybody who has started receiving care will not benefit.
You may have to sell your home
Every year, around 20,000 people have to sell their homes to meet care costs and Louise Higham, financial planning director at investment firm Tilney, said this is unlikely to change despite the new cap.
“Families should not be lured into a false sense of security. Many will still have to sell homes to pay for care. If you’re getting care where you y live, , or only yg going into a home temporarily, the means m test will not include your ho home.
“But if you’re g going into care permanently, it may m include your home, unless your you partner, any of your childr children under 18, or a relative relati who is disabled or over 60, lives liv there.”
Some with serious se health problems p needing complex treatment may be able to claim NHS continuing healthcare, arranged and funded by the health service.
But Olivia Kennedy, a financial planner at wealth manager Quilter, warns the assessment process can be trying. “Families and their loved ones must undertake regular reviews to see if they need this funding.” To qualify, you need high caring and medical needs that require regular intervention from medical experts and professionals.
You’ll also have to demonstrate potential harm if you don’t get the care you need. Talk to your GP if you think you may qualify.
Your options for covering costs
Instead of selling your home to pay for care, you could rent it out instead, says Sarah Coles, senior financial planner at Hargreaves Lansdown.
This won’t be possible if somebody else lives there. “Rental income is not guaranteed and you’ll have to fund maintenance and repairs, too.” Another option is to set up a deferred payment arrangement with the council.
This is a long-term loan you can use to pay for care home fees if you own your home, secured against its value, and is typically paid back when your property is sold after death. Sarah says: “To qualify you must live in a care home and the value of your other assets must be less than £23,250.”
If you do sell a property you could simply spend the proceeds on care fees as they arise, or buy something called an immediate care annuity or care fees plan.
“These pay a fixed amount to the care home every month for the rest of your life and tend to cover the gap between pension income and the cost of care,” adds Sarah.
“They pay much better rates than standard annuities, but you will still need to pay for care for a number of years to break even.”
Alternatively, homeowners could unlock the capital in their property via an equity release lifetime mortgage. Interest on the loan will roll up and needs to be repaid when the property is sold. The longer you live, the more it will cost.
Caring for carers
Five million people are juggling caring responsibilities with work, that’s one in seven of the workforce, according to campaigner Carers UK.
A staggering 1.4 million people provide more than 50 hours of care a week, while more than a million care for more than one person.
Their numbers are growing. Every day, 600 people give up work to care for an older or disabled relative.
Make sure you’re claiming everything you can, says Olivia Kennedy at Quilter. This includes carer’s allowance, a benefit worth £69.70 a week paid to those who spend at least 35 hours a week looking after or supervising someone.
If you receive a carer’s allowance, jobseekers’ allowance or employment and support allowance, you’ll automatically get NI credits towards your state pension entitlement. Olivia adds: “If you’re not receiving these benefits and are caring for 20 hours a week or more, claim carer’s credit.”
Also check if you are eligible for universal credit, says Sarah.
“The person you’re caring for may also be able to get a range of benefits including personal independence payments, attendance allowance and pension credit.”
Some people who have disabilities or are severely mentally impaired may be eligible for a discount on council tax. Those who care for them may be eligible too.
Typically, care homes charge £600 a week, Figures from Age UK
Can I give away assets to pay less?
Many will be tempted to give assets away or sell the family home to get round the council means test and bag free care, but Stephen Lowe at Just Group warns against this. “Under ‘deprivation of assets’ rules, your council will take into account any assets you gave away to reduce your contribution to care costs.” ■ Next week: How to navigate the UK’s care system