Long Term Care – What you need to know
Meeting the cost of residential and nursing care in old age is a growing issue for many people in the UK. As life expectancy continues to lengthen, more of us can expect to require some form of long term care.
How much will care cost?
Long-term care costs are high and industry trends suggest fees will continue to rise.
Care at home
Most of us would like to stay in our own homes – and local authorities try to enable this for as long as possible. The average cost of home care is £17.57 an hour . So just two hours of daily home care could amount to almost £250 per week. Live-in care can start at around £700 per week.
The cost of residential care can vary hugely by location and depending on whether an individual requires nursing or not. The table below shows average regional weekly care home costs around the UK for 2011/12 – with and without nursing care.
On average an individual can expect to pay around £27,144 a year for a residential care home, rising to over £38,000 if nursing is required.
Remember too that these are only the costs of residency and nursing. Costs that may still need to be met on top of a care home’s bill might include:
- Clothing, toiletries and personal items
- Trips and treats
- Telephone calls
If care is fully funded by the local authority, you are allowed to retain a Personal Expense Allowance to cover items like these. When looking for a home it is important to ascertain what is included in the fees and what isn’t.
People are living longer
The costs can end up being greater than originally anticipated. While the average life expectancy for an individual going into long term care is around 2 and a half years , this allows for severely sick and disabled people requiring nursing care admitted straight from hospital and therefore receiving state funding.
If we remove this group of care residents from the statistics, our experience suggests that the average stay in a care home for a self funder is actually more like 4 years, with a 1 in 8 chance of living over 7 years.
Average weekly care home fees around the UK 2011/12
(Source: Laing & Buisson, Care of Elderly People Report 2011)
|Area||Care Homes||Care Homes with Nursing|
|Southern Home Counties||£583||£806|
|Northern Home Counties||£607||£867|
|Yorkshire and Humber||£483||£650|
Can my Local Authority help?
Qualifying for support
Local authorities and the NHS can help with the cost of care – but support is limited. State assistance with the cost of old-age care is means tested – primarily by imposing upper and lower capital limits on the value of your savings, property and other assets.
The limits across the country differ:
Capital limits for care funding 2009/10
- Upper limit
- Lower limit
- Northern Ireland
So, if you live in England and your assets, including any property, are worth less than £14,250, care bills will be paid in full by the State. If they’re worth more than £23,250, you will normally be expected to pay for your own care in full.
A reducing scale of support applies between £14,250 and £23,250, based on you contributing £1 a week for every £250 in assets over £14,250.
|Value of assets over £14,250 limit||£3,750|
|Divided by £250||£15|
|Multiplied by £1||£15 to be paid per week|
How can I pay for care?
Four key questions to ask yourself:
- Do you actually need to pay for care? Check what applies in your particular case.
- If you do have to pay for your care, what help is available from the state? In England, benefits up to £10,000 a year are available; in Scotland the figure is higher still.
- What might be the best way to meet care costs? Work out the shortfall between the cost and the available income, and then look at the capital available.
- What options are there that will help ensure money to pay for care doesn’t run out?
If you do have to pay for all or some of your care, the options include:
|Own Income||You may receive sufficient income from pensions and existing savings and investments or rental income from your home to pay for your care.|
|Family Contribution||In many cases, your family will be able to cover the cost for you.|
|Savings Accounts||This includes deposit accounts, ISAs and National Savings.|
Very low risk but, as a result, you will have to hope that interest is sufficient and that your capital isn’t eroded too quickly.
|Long Term Care Plans||These are specialist insurance plans which, in return for a one-off lump sum payment, pay a guaranteed income for life. If income is paid direct to the care provider, it is tax-free*.|
The main benefit of a Care Plan is that it can provide the reassurance of payments for life. This must be balanced against the risk that if the person in care dies early, the capital used to buy the annuity may not be returned – unless additional Capital Protection Insurance is purchased.
|Investments||There are many possibilities here from bonds to shares.|
However, the most potentially profitable are usually the highest risk and there is no guarantee that values won’t fall.
*The rules governing taxation are subject to review and can change and will depend on individual circumstances.
How is my home taken into account?
Anyone with assets worth over £23,250, including property, is expected to meet the cost of care in full. Consequently, owning your home is one of the major reasons why people fail to qualify for support with the cost of care in old age.
Selling a much-loved home can be a highly emotional and difficult decision. But it is one that many people face each year to help pay for long-term care.
The authorities are wise to people attempting to rid themselves of property to reduce the value of their assets, and may ask detailed questions about current and past property ownership. Strategies such as bequeathing a property to offspring or putting it in trust may be viewed as a deliberate attempt to deprive yourself of capital and such assets may still be included in the means test at the local authority’s discretion.
When property is disregarded
A property can be excluded from the means test if it continues to be the home of someone else.
This can include:
- a spouse or partner;
- a relative who is over 60 or incapacitated;
- a minor under 18 who is dependent on the person in care;
- a separated lone partner with responsibility for a minor;
- in some circumstances, someone who gave up their own home to look after the person now going into care.
Deferred payments agreement
There may be some scope to come to an arrangement with the local authorities. Under a ‘deferred payments agreement’ the local authority may agree to help with the cost of care and will look to recoup these costs when the property is eventually sold.
The 12-week property disregard
Even if it is agreed that a property must be sold to help with the cost of care, homeowners are given a little breathing space.
Provided other assets fall below the upper capital limit of £23,250 (£22,750 in Scotland, £22,000 in Wales), the local authority will pay care home fees for up to 12 weeks to allow time to sell the property.
If the property still isn’t sold after 12 weeks, the local authority will move to a deferred payments agreement – as above.
Using property to fund care
here are a number of ways in which property could be used to help fund care.
|Equity release||As long as someone is still resident at the property, this enables funds to be released while still allowing the home to be retained.|
|Rental||Letting out property could deliver a regular income stream but owners need to be sure the net income after bills and management costs will be enough to cover care bills.|
|Capital investment||Once sold, the proceeds of the property could be invested to generate a regular return.|
|Other schemes||Some Care Plans can allow borrowing against the property, removing the pressure to sell quickly.|
What is a Lasting Power of Attorney?
How to give others the legal power to make decisions on your behalf
Setting up a lasting power of attorney (LPA) gives someone authority to handle another person’s affairs if they are mentally or physically unable to do so themselves.
The Lasting Power of Attorney was introduced in 2007 to replace Enduring Power of Attorney (EPA). The key difference is that EPAs are not registered and did not cover personal welfare. It is possible to register an EPA provided it was signed before 1 October 2007 and to set up a Personal Welfare LPA to run alongside it.
An LPA is easy to set up. Without an LPA, even close family members may not have the authority to make decisions about your care in old age, your financial welfare – or your assets. Never assume a person will be able to act for you simply because they are an immediate family member.
Types of LPA
There are two types of LPA:
|Property & Affairs||Enables the attorneys to make decisions about how your money is managed and your property and other financial affairs are handled.|
|Personal Welfare||Covers healthcare and welfare, including medical treatment, and where a person lives.|
Each of these LPAs requires a separate application and a separate fee when it is formally registered. It is strongly advisable to arrange both kinds of LPA so your affairs are fully covered.
Putting the LPA into effect
Once drawn up, copies of the LPA can be kept by you, your solicitor and your attorneys. If the time comes that the LPA is required, your attorneys must register it with the Office of the Public Guardian. This requires completing an application form and a fee (currently £150). Separate fees are payable for each LPA, so consider how these fees would be funded.
Can I get more information?
|Information on long-term care and choosing a nursing home||Age UK|
Tel: 0800 169 6565
|Benefits & allowance entitlements||Citizens Advice|
Department for Work and Pensions
Government Public Services
|Getting a care assessment||For an assessment of care needs for yourself or a relative, contact the local authority’s Adult Services department (NB must be the local authority for the person needing care).|
|Researching care services||The Care Quality Commission provides details and quality ratings for care services and care homes.|
Tel: 03000 616161
|Support for carers||Carers UK provides information and advice for those looking after a relative and campaigns for change.|
Tel: 0808 808 7777
|Equity release||Equity Release Council provides a list of member companies that adhere to its code of conduct and can provide information and factsheets.|
Tel: 0844 669 7085
|Inheritance tax, trusts & estate planning||To discuss tax liabilities on death or putting assets in trust, speak to a qualified solicitor who is a member of the Society of Trust and Estate Practitioners (STEP)|
Tel: 020 7340 0500
or Solicitors for the Elderly
|Lasting Power of Attorney||To find a solicitor to help arrange Lasting Power of Attorney (LPA), contact the Law Society or Solicitors for the Elderly (details above)|
Tel: 020 724 2122
www.lawscot.org.uk for Scotland
Tel: 0131 226 7411
For information on registering an LPA The Office of the Public Guardian.
 Laing & Buisson, Domiciliary care UK market report 2011
 Laing & Buisson, Care of Elderly People – UK Market Survey 2010
 Laing & Buisson, Care of Elderly People – UK Market Survey 2010
 PSSRU, Length of Stay in Care Homes, Jan 2011