Paying The Cost Of Your Care Home Fees

Typical costs of care in England are in the region of £500 per week for residential care although this can increase substantially if nursing care is required. You should check with the care home to ascertain costs before committing to a care package.

Your financial assessment by the local authority

Before you move into a care home the local authority will carry out a means tested assessment of your assets. This includes 2 main areas.

Your income

• interest on your savings

• private and/or State Pension income

• benefits , such as Pension Credit, Attendance Allowance or the care component of Disability Living Allowance

Your capital might include:

• all savings

• investments (but excluding any insurance related investments)

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• national savings

• ISA's PEP's, Cash

• any property , including property outside the UK

You will be allowed a small allowance per week once you are in the care home

What is included in the assessment

If you have over £23,000 in capital assets, you will have to pay the full cost of care yourself.
If your assets are  between £23,000 and £14000, you will have to pay some of the cost of care. Once the level of your assets is below £14,000, then this is disregarded for the purpose of the assessment

What may be excluded?

If your spouse is still living in the home and is not in receipt of care, then the house will be excluded for the purpose of the means test. However, if your spouse dies or they have to move into care, then the house will be included for the means test. There are certain other reasons for excluding the main residence, such as if a child has given up their main residence to move in with the person needing care. In addition , if a house is in an Asset Protection Trust, the home may be excluded from the means test provided the trust has not been set up for the purpose of avoiding the means test.

If you have investments that are insurance based, such as investment bonds or with profit bonds, these are disregarded for the purpose of the means test provided that they have not been taken out for the specific purpose of avoiding the means test. This is known as “the deprivation of assets rule”. You should speak to an IFA qualified in the area of long term care to discuss this.

Long Term Care Annuities

If an elderly person is already in care they can pay for the cost of care by disposing of assets. However, many elderly people are worried that the money may run out before they die. An option is to buy a long term care annuity.

How Do Long Term Care Annuities Work?

Fred is 87 years old and is living in a care home. He has a house he still owns worth £150,000 and has savings in the building society totalling £80,000. Fred has an income of £10,000 per year and his care home fees are £26,000 per year. This means he has a shortfall of £16,000 per year. He has been using his savings to pay this but is concerned he may run out of cash before he dies and be forced to sell his house. He would like to leave his house to his children as an inheritance. Fred has spoken to a long term care specialist who has offered him a long term care annuity as a way of funding his care. In exchange for a lump sum of £60,000, the insurance company promises to pay Fred £16,000 a year for as long as he lives. Fred realises this is a gamble, if he dies earlier than expected, then he will have wasted some of his money, however if he lives longer than expected, then it will be a bargain. Either way, Fred does have the comfort of knowing that he will always be able to afford care for as long as he lives and he can be certain his children will inherit the house.

Where to Get Advice?

PSA Financial Services Ltd offer a free counselling service for clients with long term care questions. If you have questions, either about yourself or on behalf of a relative, please contact Damian Mitchell on 0116 2993000 or by email at mitchmitch@tiscali.co.uk