To many Australians, long-term care in the UK can feel like the equivalent of signing a blank cheque with so many variables. Many Brits probably feel the same way!
But if you’re in the UK and are planning on staying long term, if not for the rest of your life, it’s important to be aware of long-term care, and the issues around it. Ignoring it and thinking any problems will sort themselves out is liable to leave you with a big headache further down the road.
As you’ve probably seen in the UK media recently, long-term care is a very topical issue, with ongoing debates over how state provision should be funded. It’s very much a political football, with talk of “death taxes” and suggestions of people being forced to sell the family home to afford the cost of long-term care provision.
Here are seven practical pointers for you to consider. These cover the key issues that we think you should be bearing in mind when you’re looking at the prospect of long-term care as part of your financial planning process.
1. We’re living longer so care matters
Advances in healthcare provision mean that we’re living longer. According to the Office for National Statistics, a 66-year-old man has an average life expectancy of 85 years and a woman the same age has a life expectancy of 87. Furthermore, there’s a 25% chance of that man celebrating his 92nd birthday and the woman her 94th.
The same medical advances mean that many of us will be living longer with an underlying health condition that won’t prove terminal but could restrict our ability to look after ourselves.
Research suggests that, in the next 20 years, the number of people aged 85 and over who need round-the-clock help with basic daily needs will nearly double.
2. Long-term care can be very expensive
Half a million people are currently living in care homes in the UK.
The average residential care home in 2020 cost more than £34,000 a year, with that figure rising to £48,000 if nursing care is required.
Even if you’re not living in a care home, you may well still face domiciliary care costs while living in your own home. A basic care package involving a care visitor for two hours a day at £15 an hour will total £10,920 a year.
Bear in mind that these costs are not fixed. They are liable to go up each year in line with inflation.
At the current time (September 2021), state provision is targeted at those in most need and unable to meet funding costs themselves.
3. There are various ways to fund long-term care costs
Under the current system, you may be able to claim some of the cost of long-term care provision from the NHS or your local authority. However, even with this support it’s likely that, if you’re relatively well-off, you’ll need to cover most of the cost yourself.
Potential sources of financing your care could include:
- Your pension savings
- Your State Pension
- Other income and savings
- Selling or raising money against other assets, such as your residential property.
Clearly how you fund any long-term care you require will depend on your personal circumstances.
4. Long-term care insurance
Until relatively recently, insurance companies used to offer long-term care insurance products. These would involve you paying a regular premium in return for them paying for your care when required. However, the market for these products has almost disappeared.
One remaining insurance option, however, is an “immediate needs annuity”. This entails you paying a potentially substantial lump sum when care is required in return for guaranteed payment of your care fees for as long as necessary.
5. The cost of remaining in your own home
Even if you’re able to stay in your own home when personal care becomes necessary for you, there still may be some associated costs on top of the cost of care provision.
Your existing property may need some adaptions to enable you to continue living there comfortably. These could include internal alterations, such as re-configuring a house to provide a new bathroom and bedroom on the ground floor, for example.
One alternative to this could be for you to downsize your property. Not only might this mean your property is more appropriate for your needs, but you may also be able to move closer to your family in an area where essential services are more accessible.
6. The importance of Power of Attorney
There’s one key step you can take now when it comes to planning your future with possible care requirements in mind.
By setting up a Health and Welfare Lasting Power of Attorney (LPA), you’re able to give someone you trust the legal power to make decisions about your medical care and moving into a care home.
You should also set up a separate LPA for the management of your finances. With this, you can give clear instructions on how you want your finances managed if you’re unable to do so.
Without both LPAs in place, it can be difficult and potentially costly for your family to act in your best interests.
7. Long-term care should be part of your retirement planning
As we said in the introduction to this article, it’s important to face up to the potential need for long- term care at some stage and make plans accordingly.
You should therefore include long-term care planning as part of your retirement income strategy. Make sure you’re cognisant of where funding to meet care costs could come from if it’s required.
Most importantly, ensure you have conversations with your family about it. Go through “what if?” scenarios with them so both you and they have the peace of mind that arrangements are in place to meet your care costs without any drastic financial steps being required.
Get in touch
At bdhSterling, we have a wealth of experience in helping clients plan their financial future – including advising them on long-term care funding.
Get in touch to find out how we can help you.