Paying Long Term Care Home Fees ??As life expectancy in the UK is expected to continue to increase, more and more people are living to an age where they require care. The likelihood of going into care, for how long, and how much it will cost are often not factored into an individual’s financial planning.
Many people assume that the Government will pay for everything, but in reality, most people will end up having to contribute significant sums when paying for care. This may affect their lifestyle in retirement, plus any potential inheritance they were planning to pass on.
As a large proportion looking at going into long term care have much of their assets in their residential property, the plan is often to sell the property, rather than looking at other options available for paying long term care home fees.
This can work for a single person or widow, but where you have an elderly couple with one needing to go into care, it is not particularly pleasant for the spouse who is in good health to have to deal with on top of seeing their spouse go into care.
Therefore the Dilnot Commission was set up in July 2010, following a commitment in the Government’s coalition agreement, to make recommendations on how to achieve an affordable and sustainable funding system for care and support for all adults in England, both in the home and other settings.
The key recommendation is the introduction of a cap of £75,000 on the total amount any individual has to pay for their care when the new scheme begins in April 2017. At present if an individual has assets of more than £23,250 they are classed as a “self-funder”, and the cost of paying for care is open-ended – they would have to pay the full cost of their care for as long as they need it.
However, it is very important to point out that the cap refers purely to the ‘care’ element of the outlay - the costs for food and accommodation are not covered by this cap. However, in relation to this, the announcement promises that in future the Government will limit these costs to £12,000 a year.
When an individual needs to go into care they have a choice of various care homes, all with differing levels of cost. Therefore, the £75,000 cap is not simply based on the actual care home costs, but on the standard fee, which their particular local authority would pay for the care for that individual.
This avoids the situation of an individual going into a very expensive care home and then the state having to pick up the bill much quicker than they would for someone in the cheapest local authority option.
Another change has been the level at which individuals will be classed as “self-funders". This will increase to cover those with assets of more than £123,000, compared with the current level of £23,250.
In cases where assets also include the value of their home this increase isn’t going to make a massive difference, as most people’s properties are worth much more than this figure.
However, even those with assets worth less than £123,000 will have to pay part of the cost; the local authority will only cover the bill in full when their assets are depleted to £17,000.
- Care costs will be capped at £75,000 and be subject to a higher means test of £123,000 – but this will not take effect until 2017. Anyone needing care before then will be subject to the current means test limits and with no cap on costs.
- Projecting future potential care and accommodation costs is advisable.
- Look at the options to keep assets within the family – for instance by renting out the home and using that as a source of income.
- There are three main options for using the capital to help meet the shortfall: deposit accounts, equities and annuities. All have advantages and disadvantages.
- Check that all available benefits are being claimed: many people assume that owning a home prevents you from claiming assistance, but this is not always the case.