How much will care fees be?
Have you found a home you like, but are worried about what the cost will be? Do you know how long you might need care for and what happens if your money runs out?
This is an understandable worry considering the average cost of care in the South East in 2018 was £732 per week, rising to £1,017 per week if nursing care was required (Laing Buisson, Care of Older People Report 2018). This report includes local authority funded care, so the cost for a private resident could be much higher. The cost of paying for care is potentially one of the most expensive decisions we have to make in life, but fortunately, you do not have to do this on your own.
You may have already set up a Lasting Power of Attorney (LPA) to allow a friend or family member to make decisions on your behalf. If not, then doing this in advance can make things much less complicated than leaving it too late. Your attorney can help you or make the decisions for you. In addition, seeking professional advice can help you understand all your options and make the best choice for you.
If you have less than £23,250 in savings and assets, (which includes your property in some cases) you might be eligible for the local authority to pay for your care. If you are one of an increasing number of people self-funding their care fees, there is some government help available regardless of your assets.
Is there any state help?
Attendance Allowance is a tax-free state benefit payable to those over State Pension Age who have needed care for longer than six months. There are two rates of allowance depending on the care you need, the lower being £58.70 per week and the higher is £87.65 per week.
If you need care because of a complex medical condition there may be help available. An NHS Nurse can conduct an assessment of your needs. You may be entitled to NHS continuing healthcare, which would cover the full cost of your care. Alternatively, you might be eligible for funded nursing contribution which amounts to £165.56 per week. NHS continuing healthcare is only for those with complex medical conditions that require a lot of specialist care.
So, what options do you have if you are funding your own care?
You could pay directly from your capital, but in most cases, there is a risk of your money running out. If your capital falls below £23,250 then you will be eligible for state funding, but this could involve moving to a cheaper home, or top ups being required from family or friends to cover any shortfall.
You may choose to invest the capital that you have in order to draw an income. The value of your assets, the rate of return and the amount you need will determine whether the income you need is sustainable. If it is not sustainable then there may be capital erosion. There is also the risk that investments can fall which would mean a greater loss of capital as your care fees still need to be paid.
If you own a property that is going to be vacant, you may choose to rent this out. The rent can be used as an income, but the risks include void periods with no rent, wear and tear, costly repairs or problems with tenants.
What are care fees plans?
If you want to guarantee that your care fees will be paid for as long as you need them, then purchasing a care fees plan may be the option for you. Care plans are also known as immediate or deferred care annuities and are similar to pension annuities. These plans are purchased with a lump sum payment and guarantee to pay a specific sum every year for life. The rates can vary and are based on an individual’s age and health (assessed through medical records). These payments are paid tax-free to a care provider, but should you leave care then the payments are made to you and will be subject to tax.
The risk with purchasing a care plan is that you commit a lump sum at the start, but you may not live long enough to get good value. It also reduces the value of your estate, if leaving an inheritance is important to you.
If you would like to discuss your circumstances in a free initial consultation, then please contact Matthew Porter at mporter@bdhsterling.com or on 01372 724 249
You can also download a longer guide to paying for care here.
A pension and a stocks and shares ISA are investments and can go down in value as well as up. You could get back less than you started with. This article shouldn’t be taken as financial advice and is based on our understanding in February 2019
