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 it is as important as finding the right place.

Residenital care does not come cheap; the average yearly cost of a place at a care home is about £25,000 – £480 per week – according to homecare provider Prestige Nursing & Care. A nursing home place costs more than £30,000 per year.

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

Social services funding

The social care funding system is currently means tested. In England and Wales , if you have savings of less than £23,250 – including property – then social services will contribute some of the cost of residential care. In England, if your savings are below £14,2500, all residential care costs will be met by social services. In Wales, the level is £23,250.

The rules are different in Scotland. While the care component of residential care is free for everyone, people with more than £24,750 in savings still have to pay ‘hotel’ costs, such as accommodation, food and laundry.

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 £23.25 a week in England, £24 in Wales and £23.50 in Scotland – to spend as you choose.

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 £77.45 per week at the higher rate and £51.85 at the lower rate.

NHS continuing health care

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. To be eligible a resident must have a significantly high level of needs in a number of areas, with their ‘primary need’ being health-based.

Other benefits

Some benefits can still be claimed even after someone has moved into a care home.

For example, if you already have the mobility component of disability living allowance (DLA), which is worth £54.05 per week at the higher rate or £20.55 at the lower, it 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.


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.

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.

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.

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.

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 £23,250 – 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.