CARE COSTS –

THE LOW DOWN

It’s impossible to predict what kind of care might be needed in your later years. But it’s a certainty that we will all need it in some form. Requirements will range from an hour’s assistance at home every day to full-time residential nursing care.

In England alone, Age UK estimates that 1.2 million older people will be in need of care and support by 2040 [1]. That doesn’t necessarily mean being in a residential care home. Some will require little or no formal care and some will fall somewhere in the middle. This can make it difficult to plan ahead – and many don’t bother.

A study revealed that almost all (96%) parents over 60 admitted that they have not put any plans in place to pay for any long-term care and just 21% of these intend to make provisions at some stage. [2]

Having a pot of money in place for care needs is sensible to reduce the risk of facing huge unexpected bills at a time when you won’t want added stress. Here are some of the things you need to know about long-term care planning.

PAYING FOR CARE IN LATER LIFE

Care costs are paid for either by you – known as self-funding – local authority or NHS funding. The government support on offer is reserved for those with total capital assets worth less than  23,250 [3] in England. The threshold is 50,000 [4] in Wales and 28,750 [5] in Scotland.

If your assets do fall under these limits, you’ll go through a financial assessment with the local authority to see what funding you’re eligible for. While around half of care home residents are self-funding [6], most people are completely unprepared for any care costs.

THE COST OF CARE

Without knowing what kind or level of care you’ll need, there’s no blanket figure that all individuals should set aside.

However, the cost of residential care routinely takes people by surprise. The average cost of a residential care home in England is  681 per week. This increases to  979 per week, or  50,000+ a year when nursing care is included [7]. But families can easily face far higher costs if you or a loved one ends up with particularly demanding health needs.

REDUCING WEALTH TO AVOID CARE FEES

Reducing the value of the assets that are considered as part of a local authority financial assessment could backfire as very strict rules apply. If the council believes you’ve deliberately given away your home or other assets to avoid paying care fees, it will treat those assets as if they still belong to you.

There is the option of putting money into a trust, but getting financial advice to do so is crucial to ensure you’re not breaking rules about “deliberate deprivation of assets”.

THE IMPORTANCE OF FINANCIAL PLANNING

Boris Johnson has recently announced that from 6th April 2022 to 5th April 2023 National Insurance contributions will increase by 1.25% to 13.25%.The increase will apply to: Class 1 (paid by employees) which will help pay for Social care.

The topic of long-term care is not one commonly discussed among families, however. Only 28% say they have discussed the costs of long-term care with their parents [8]. Yet the number of people that need to have care in later life is likely to rise with the growing number of “older” old people.

A financial adviser can help you make a plan to provide for long-term care costs, and take the uncertainty out of the situation, should it arise.

If you don’t end up needing to pay for care, then your savings can simply be passed on to family as inheritance.

Source:

 [1] Age UK: Health and Care of Older People in England, July 2019

[2] Schroders Personal Wealth, Family and Finances Report, 2021

[3] https://www.nhs.uk/conditions/social-care-and-support-guide/money-work-and-benefits/paying-for-your-own-care-self-funding/ 

[4] https://gov.wales/charging-social-care

[5] https://careinfoscotland.scot/topics/care-homes/paying-care-home-fees/capital-limits/ 

[6] https://www.carehome.co.uk/advice/who-pays-what  

[7]  Which? Care Home fees article

[8]  https://assets.ctfassets.net/l7z7tzydh3um/33sO4i2cz07rq0zMAhf7Db/515ca15d5d8c4d6af047aaac3f26dbe3/SPW_Family_and_Finances.pdf