Top 10 tips: financing residential care
Residential care in the UK is costly, but there are many ways you can pay for it. Dan Parton reports.
When looking for a care home, calculating the costs of residential care is as important as finding the right place.
Care does not come cheap; the average yearly cost of a place at a care home is about £23,000 – £442 per week – while a nursing home place costs some £32,000, according to market intelligence provider Laing & Buisson.
While costs vary markedly across the UK, depending on factors such as geography, the affluence of the local area and the standard of the care home, a permanent stay in residential care can quickly drain your resources.
Below are 10 ways that a care home place can be paid for.
In this article:
1. Social services funding
2. Income and savings
3. Attendance Allowance
4. NHS continuing health care
5. Other benefits
6. Annuities
7. Impaired life annuities
8. Immediate care plans
9. Selling your house
10. 12-week property disregard
1. Social services funding: The social care funding system is currently means tested. In England, if you have savings of less than £22,250 – including property – then social services will contribute some of the cost of residential care. If your savings are below £13,500, all residential care costs will be met by social services.
In Wales, anyone with savings below £22,000 receives assistance and below £19,000 will have all their costs met.
The rules are different in Scotland. While the care component of residential care is free for everyone, people with more than £21,500 in savings still have to pay ‘hotel’ costs, such as accommodation, food and laundry.
2. Income and savings: If you have to pay for your own care, these will be important. State and any private pensions can help to pay for residential care,
as can savings. But whatever the cost of care, you have to be left with an income of at least £21.15 a week – £21.38 in Wales – to spend as you choose.
3. Attendance Allowance: This is a non-means tested, non-taxable benefit available to anyone aged 65 or over who is physically or mentally disabled, whether they are in a care/nursing home or not. This is worth £67 per week at the higher rate and £44.85 at the lower rate.
4. NHS continuing health care: For people in a nursing home, the NHS normally contributes £101 per week towards fees to cover the cost of the nursing. Those with long-term or chronic conditions may be eligible for continuing health care funding, where the full cost of care and accommodation is paid for by the NHS.
5. Other benefits: Some benefits can still be claimed even after someone has moved into a care home.
For example, if you already have Disability Living Allowance the mobility component, which is worth £46.75 per week at the higher rate or £17.75 at the lower, can still be claimed. But the care component of DLA is likely to be affected, see DirectGov for more details.
Care home residents can also claim pension credit if their income is below a certain level. If a single person’s pension and other income, such as investments and certain other benefits, is below £124 per week they are eligible for pension credit.
6. Annuities: An annuity can turn your pension pot into an income for the rest of your life. In exchange for a lump sum payment, an insurance company will invest it in relatively safe government stock, with a return linked to the Bank of England’s base interest rate, which will provide a regular income.
However, to get a decent return you need to have significant savings in the first place; a man aged 65 needs savings of £300,000 to receive £17,000 a year in income, according to recent figures from The Guardian.
7. Impaired life annuities: People suffering from certain serious medical conditions such as cancer, heart disease or strokes can use an impaired life annuity to help fund care costs.
With the reduced life expectancy these conditions bring with them, insurers are able to pay a higher level of income compared with a standard annuity.
8. Immediate care plans: An immediate care plan (ICP) is a type of annuity that can be purchased when a person already needs care and provides a guaranteed income in exchange for a lump-sum investment.
The difference between an ICP and a standard annuity is that it is based on life expectancy; the older and frailer someone is the better terms they are likely to get.
An ICP pays out monthly until the person no longer needs care, which is usually when they die.
The risk is that if the person taking out the plan dies earlier than expected their family does not receive any money back, although some policies do offer an option to safeguard the capital in the event of early death. But on the other hand if the person exceeds their life expectancy, the insurer continues to pay out.
9. Selling your house: Property is counted as capital by the government when it works out whether someone is exempt from paying their own fees.
While there are some exemptions, such as if a spouse or a close relative under the age of 16 is still living in the house, homeowners may have to sell their house to pay for their care fees.
But with some financial planning, as detailed above, it is not inevitable that a house will have to be sold to pay for care.
Note that it is illegal to transfer ownership of a property just to avoid paying care home fees. If a transfer is made within 6 months of someone needing care, the local authority is able to reverse the decision or act as if it never happened.
10. 12-week property disregard: Those that need to sell their homes to pay for residential care can use the 12-week property disregard, which is worth up to £3,000. This is where people with savings of less than £22,250 – excluding property – are exempt from payment for the first 12 weeks after moving into the care home. The local authority makes up the shortfall between this and the cost of the care.
But if the property is not sold within 12 weeks it is treated as a deferred payment and will be claimed back by the local authority against the eventual proceeds from the sale.
ref 10a. with regard to the deferred payment, is there an upper time limit in the event of the property not selling. I intended that the proceeds from the sale of the house would be put up as a lump sum annuity at the outset to pay for nursing/residential home fees for both my parents, and at a min cost of 40K a yr this would soon be used up.
My mother died a month ago and now my dad who is
blind now has to go into residential care. Half of the
house was put into trust. Do we have to sell the house
now to pay for dads care.
our mother has dementia and social services have offered to fund £550.00 for respite, leading to permanent residential care. One member of her 5 children has strongly objected and will fight us all to not use Mum's capital to fund her care. Can we still use her capital to provide a higher standard of care, even though S. Services are offering part payment. She has an apartment to sell to fund this care
my mum may be moved into a care home soon my sister and i had the title deeds changed into our name 2 years ago can the government claim the house off us
Dad currently in home to give mum emergency respite due to sever bad back. Dad disabled and limited movement from neck down. May need to go to care home as mums health has deteriorated and even with care is struggling to cope with him at home. Both nearly 78 years old. Nothing wrong with either mentally. Will mum be forced to sell house to pay for dads care if he has to go into home permanently?
Kate
If the house is not sold in 12 weeks, there are options that can be pursued.
There are deferred payments schemes, which can put a legal charge on the property, rather like a mortgage. Here, the money is lent to pay care costs that would otherwise have been paid from by the sale of the property. This loan must be repaid when your estate is administered or the property is sold off.
However, check this with the care home/local authority to confirm their policy on this.
My mum in law is to go into residential care due to dementia and we are due to have a financial assessment by social services. She does have some savings and is over the threshold so will have to fund her own care. She also sold a property approximately 18 months ago prior to her recent diagnosis. The proceeds from the property sale were shared between her three children. Will this have any bearing on the social services financial assessment?
Bev,
The proceeds from the sale of the house should not have any bearing on the social services assessment, as it was completed 18 months ago and was prior to the diagnosis. Local authorities generally only act if it is within 6 months.
Hope this helps and let us know how you and your mother get on.
Regards, Dan Parton
My mother has had a stroke and is now in hospital. She may need residential care. She gifted the house to my brother and I eight years ago, and has savings above £22,250. Can my mother make a gift of money to my brother and I in the present circumstances? Best Regards Anne
My Mother has now been deemed as needing Nursing home care, she has some savings but these are below the limit. However she owns a house which has been willed to her children 4 years previously will this have any bearing on her funding assessment. Many thanks Suzanne.
If the property is not sold but rented until the demise of the person in care will the local authotity do a deferred payment?
My mother has dementia, she lives with my sister who works full time. My mother is now aggressive and refuses to let my sister use any utilities - it being a battle for my sister to cook, clean and even bathe. I think Mum should be in a home but she has no savings, and lives in a council home....please, any ideas?
my mother is in a care home with dementia and i have power of attorney. Her savings are around £15000 and her property is currently rented out but will shortly have to be sold.Can gifts of £3000 p/yr. be given to her grandchild without any problems from either the local authority or inland revenue ?