AUG 2021: Paying for care

Care costs

Unless you’ve been through the process before, it’s only natural to worry about how you can fund living in a care home. There are a number of approaches to self-funding residential care, but first let’s establish the rules and criteria for any state-funding which may be available.

Government funding for care in England

Every local council in England offers a completely free care needs assessment, designed to work out what care is needed for an individual. This is the first and essential step if you are hoping to qualify for any level of publicly funded support for residential care. Part of the assessment looks at your income and your assets – your home, shares, etc.

In England, you will currently (2021/2022 financial year) need to have savings (including investments and equity in your property) of less than £23,250 to qualify for any level of council funding for residential care. If your savings and capital are less than £14,250 you are entitled to maximum support. It’s worth noting that if a wife, husband, civil partner, close relative aged over 60, a disabled relative or a dependent child lives in the home of the person being assessed, that property won’t be included in the financial assessment. If any of the savings or assets are jointly held, like a bank account shared between a married couple, then only 50% of its value is assessed.

It is also possible that, if you have significant ongoing care needs, you may have access to NHS Continuing Healthcare (NHS CHC) funding for your residential care costs, which is assessed by, as you’d expect, the NHS. There are an official framework and tools which NHS staff use to make this assessment. Your local CCG (clinical commissioning group), usually accessed via your GP, will guide you through the process. It is detailed and thorough, and because the assessment is so comprehensive, not every person at the same stage in life and living with the same medical care needs may qualify for support and therefore full care home funding. They may, however, qualify for NHS-funded nursing care (FNC) assistance. This will not cover the costs of a residential care home but it will provide a weekly contribution.

Of course, with the state-funded routes, you have less freedom in choosing your care home or nursing home, but you do still have some say. You can find out more about NHS continuing healthcare here and your council’s free care needs assessment by visiting the council’s website. The independent body Beacon gives up to 90 minutes of free advice on continuing healthcare, and it’s worth contacting the Citizen’s Advice Bureau to explore your rights to support and benefits. We also work closely with an independent care fees advice company Eldercare Group, who can provide you with specialist jargon free advice.

Self-funding residential care home fees

The idea of moving into residential care can be challenging for some people; if the care home has the right facilities and feel, and a warm and supportive attitude to care, settling in is usually much easier than people think. After choosing so carefully, if you or your relative are happy in a particular care home, the last thing you want is to have to move at a later date because of insufficient funds. It’s vital that you know how much the care home costs each year and working out if you need any extras, and what funds you have available. We always recommend speaking with a reputable independent financial adviser to help you with your calculations and decision-making.

If you’re funding residential care privately, you are still entitled to certain benefits, such as: the Attendance Allowance (for people with a disability or terminal illness who require help); Personal Independence Payment (PIP) if you qualified for it before the age of 65; NHS-funded nursing care (FNC) assistance; state pension and some other standard benefits.

Self-funding options

Assuming nobody else is still living in it, selling your home is the obvious and, in principle, simplest route to releasing funds for care. Rather than having the proceeds sit in a standard bank account, some people make investments designed to provide additional income above the value of the investment. Of course, this requires careful investigation, ongoing management which may be costly, and always contains risk, since no investment can be guaranteed. Again, an independent financial adviser is a good port of call when deciding how to manage the money made available by selling a home.

Renting your home out may provide more money for the long-term. This option will depend on having a letting agent or trusted friend or family member with the availability and expertise required. The income may be subject to tax, there may be ongoing costs in terms of insurance, repairs, upkeep and even accountancy fees, plus times when the home is between tenants. Depending on the rentability and value of your property, it can be an attractive answer to self-funding care. It also means that, subject to the rights of any tenants, you can sell the home at a later date, when house prices may have risen.

The deferred payment agreement is an arrangement with your local authority. It is only available to those who have less than £23,250 in savings or assets – excluding the value of the home. This method involves the council paying your care home fees and reclaiming what it has paid out when your home is sold. Because it’s a loan, it will also involve additional costs in terms of interest and admin fees. It can also be challenging to get home insurance if nobody is living in the property.

Another option is an immediate needs annuity. It’s an insurance policy which provides a guaranteed income for life when you make a lump sum investment. That amount will on age, income needed, health and life expectancy and whether the care home costs may increase over time. The rates vary enormously and it’s essential to take specialist advice before following this route.

Finally, there are lots of companies which offer equity release on your home. The equity that’s released is not, of course, the true value of your home and while a lump sum is made available, there are other costs to consider, such as interest payments at rates higher than a standard mortgage. It also means that a company stands to make money from the property, rather than the remaining value being passed on to loved ones in an inheritance.

Before deciding on any particular route for residential care home funding, please do consult a well-regarded independent financial adviser, such as Eldercare. They will help you look at the situation objectively, free of bias, and have specialist knowledge to ensure you make the most of your assets.

If you’re unsure about how to fund life in assisted living accommodation, you can always talk to one of our team at your nearest Baycroft home. We always recommend speaking with an independent financial adviser if you own your own home or have substantial savings, and the Citizen’s Advice Bureau can be extremely helpful in explaining your rights to certain benefits and support, whatever your circumstances.

You can also view our video covering all the key points here.