Paying for long-term care: Why it matters and ways to fund it

Posted 18.11.2021

Paying for long-term care is a growing issue for many people in the UK and as life expectancy continues to lengthen, it is something that an ever-increasing proportion of the population will need to address.

As many as 1.4 million people aged 65 years and over in the UK receive some form of care.[1] Yet the current government funding available to meet the needs of elderly people is often unfair and unsustainable. Whilst the government can support some of the long-term care for those on lower incomes, the reality is that most of us will have to fund our own.

How much does care cost?

For a residential care home, the UK average for a basic level of care is around £35,000 a year, but varies a lot according to each region. For example, costs might be closer to £30,000 in Northern Ireland, Wales, Scotland and the north of England, but could rise to £43,000 or more in London and the south-east of England. [2]

Costs can also vary depending on the choice of care provider, and if more specialised nursing or dementia care is also required, you could expect to add at least another £12,000 per year on top – maybe even more.

Funding your own long-term care

There are a number of ways for you to fund your own long-term care. This article provides some options for you to consider, which you should discuss with your financial adviser to help you navigate the maze of paying for your care fees.

Care-needs assessment

Arranging care can be an emotional and confusing time, so speaking to one of our advisers who specialises in this field can provide peace of mind and security, as well as avoiding the possibility of not being able to sufficiently afford the care that you may need.

Our advisers will arrange for a care-needs assessment with your local authority, and it will first determine whether you qualify for local-authority care.

Set-up power of attorney

It’s worth setting up power of attorney as early as possible, in the event that you’re no longer able to manage your own affairs yourself (or if the loved-one you’re concerned about were to be in that situation). This allows your attorney to make decisions on your behalf about things like managing your bank accounts, paying bills, managing your pension and any investments you might have, or selling your home (and you can give specific instructions as to your wishes).

Long-term care should be part of retirement planning

It’s important to think about the potential need for long-term care as early as possible so that you can make plans accordingly.

You should therefore include long-term care planning as part of your retirement income strategy, making sure that you’ve factored in some of the potential costs of care (or a care home) in your retirement budget.

Your property assets

If you own a property, and live alone, you could consider renting it out and using the income to pay for your own care. This will mean you get to keep your property in your own estate and the house remains occupied (with all bills paid by the tenant) so that you don’t have to worry about it.

Alternatively, you could release some equity within the property, which can then be repaid from the sale of your home when you die (this option is often used by people who don’t need to leave their home and care is delivered at their own home).

Long-term care plan

Also known as Immediate Needs Annuities, these are specialist insurance plans designed to convert capital into income to help meet care fees. In return for a one-off lump sum you receive a guaranteed tax free income for life, provided that it is paid directly to the care home.

Looking after your current finances and the ability to plan for the long-term can have a dramatic effect on your ability to pay for the type of care or care home that you require. Contact our financial advisers today for further information.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

[1] Age UK analysis, November 2020

[2] LaingBuisson, Care of Homes for Older People UK Market Report, 2019

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