As you approach the later years of your life, you may begin to consider how you can afford to cover the costs if you choose to receive care - whether you decide to stay in your own property or move into a residential care home.
The cost of this care can take many by surprise. A third of people think their parents will need to sell their home in order to pay for it, according to a survey carried out by Opinium on behalf of Hargreaves Lansdown. Roughly 1 in 10 people believe they will have to pay for their parents' care by themselves.
The amount you will need to pay towards later-life care depends on a number of factors, such as where you choose to live, the extent of care you require, and how much you can afford to contribute. In this article, we break down different options for paying for later-life care and explain the eligibility criteria for accessing financial support should you need it.
How can you fund care at home?
The costs of home-care vary drastically across the country, but according to Age UK, the average is around £15 per hour. You can use this cost of care and eligibility in England tool to get an estimate for care costs in your local area.
To find a home-care agency, the UK Home Care Association can give you details of home-care providers that follow its code of practice, or your local adult social services department can point you towards approved private agencies.
While you may be able to fund the care yourself from savings or income from your pension or investments, you may need to consider whether you are eligible for help in meeting the cost, or if you may need to look at other options.
Your local council
In order to apply for financial support for at-home care, you will need to undertake a "care needs assessment". Your carer, GP or district nurse can make a referral for an assessment on your behalf with your permission. If you are found to be eligible for financial support, your local council can arrange care services for you. Alternatively, you can choose to receive direct payments from your council and arrange your own care by yourself. However, the extent that you will be expected to pay towards the cost of your at-home care will depend on the results of your means test.
How is at-home care support from your local council means tested?
To find out if you are eligible for financial support from your local council for care at home, you will have to undertake a "means test". This will assess your financial independence by taking into account your income and savings (your "capital"). As long as you are planning on staying in your own home, this will not take into account the value of your property.
Below is a table which shows how a means test assesses your total capital, and how this can affect how much you pay towards your own at-home care.
|Your capital (excluding your property)||What you will have to pay towards your at-home care|
|Over £23,250||You must pay full fees for your care (known as self-funding)|
|Between £14,250 and £23,250||Your local council will fund some of your care and you must contribute to the rest|
|Less than £14,250||Your local council will pay for your care|
Equity release is an option that can help free up some cash to put towards the cost of later-life care. This is typically available to those aged 55+ and allows you to access some of the equity you have built up in your home in the form of tax-free cash. The money can then be used to cover the cost of your care and can be repaid through the sale of your property when you pass away.
To be eligible for equity release, you must own your own property either mortgage-free or with only a small mortgage. There are two types of equity release scheme: a lifetime mortgage and a home-reversion plan. You should keep in mind that equity release reduces the value of your estate and the amount that will go to the people named as beneficiaries in your will, and with a home reversion plan, the reversion company owns all or a part-share of your home.
For more details on how both work, visit our article “What is equity release and how does it work? – Equity release mortgages explained”.
How can you fund care in a care home?
The cost of care in a care home differs greatly across the UK. Prices can range from £621 per week in Blaenau Gwent in Wales to £1,488 per week in Islington in London, according to research by Legal & General. With 1 in 10 people who move to a care home still alive after 6 years, according to BUPA, you could end up paying well over £193,000 over the course of your care, even in the cheapest parts of the UK - and that's without even factoring in annual increases in care costs.
Sell or let your property
Opting to sell or rent out your property is one of the most popular ways of funding later-life care.
More than 330,000 pensioners sold their homes to pay for social care in 2019, according to research by the charity Independent Age. The UK government is currently consulting on planned social-care reforms, which involve a “guarantee” that no one needing later-life care will have to sell their home in order to pay for it, but a decision is yet to be made. In the meantime, selling the family home may seem like the most sensible option. If you are planning to sell up, visit our article on how to find the best and cheapest estate agent to help you navigate the process.
Another consideration could be to let your family home out, allowing the rental income to cover the costs of your care home fees. However, this may not always be suitable because rental income can be depleted by a number of factors including income tax, letting agent fees, void periods, as well as maintenance and repair costs. You may end up with not quite enough to cover the care fees, particularly if you live in a more expensive part of the country such as London or the South East. Nevertheless, if you are certain that renting your home out can cover the cost of your care, we have rounded up a list of the best online letting agents who may be able to help you.
Equity release is another option that can help free up some cash to put towards the cost of care home fees. For more details, scroll up to the previous equity release section, or visit our article “What is equity release and how does it work? – Equity release mortgages explained”.
Immediate needs annuity
An immediate needs annuity can be purchased from an insurance company for a one-off lump sum and in return the insurer immediately pays regular monthly payments directly to the registered care home providing the care for the rest of your natural life. However, this is a specialist product and while it can provide the certainty of meeting care costs there are a number of disadvantages including that you may get back less than you paid in and the income provided can affect eligibility to means-tested state benefits.
Deferred payment arrangement
A deferred payment agreement (DPA) is a loan or arrangement with your local authority that is secured against your home at a fixed interest rate. The loan is set up to be repaid after you die and your home is sold, and in the meantime your council will cover the cost of your care.
However, in order to take out a DPA, you must meet the following eligibility criteria:
- You have savings or other capital (excluding the value of your home) of less than:
- £23,250 in England
- £18,000 in Scotland
- £50,000 in Wales
- You own your home and there isn’t anyone else living in the property, such as: a spouse or partner, a child, or a relative aged 60+.
In Northern Ireland, there is no formal system for DPAs. However, it is still worth contacting your local Health and Social Care Trust to see if they can facilitate this arrangement.
Local authorities are not obliged to offer a deferred payment, but if they do not, they must give the reason in writing. For example, if they think your home is not worth enough to cover your care home fees.
Your local council
If you are eligible for financial support, your local council may pay towards some or most of the cost for your care in a care home. but you will have to undertake a care needs assessment first. If you qualify for care, they will then carry out a means test to work out whether you are entitled to financial support towards the cost. This will involve a full assessment of your income and capital, and may include the value of your property.
You will still be expected to pay towards a portion of the cost from your income, determined by the results of your means test, however you must be left at least a Personal Expenses Allowance (PEA). The PEA must be at least £24.90 per week. Your council can increase this amount depending on your circumstances at their discretion.
In order to apply for financial help from your local council towards the cost of a care home, contact the adult social services department of your council and ask for a care needs assessment. There is no fee for an initial care assessment, and anyone is entitled to one regardless of their income, savings, and needs. You can use the GOV.UK website to contact your local council.
How is care home cost support from your council means tested?
To find out if you are eligible for financial support from your local council towards the cost of care in a care home, you will have to undertake a "means test", similar to the one explained in detail earlier in this article. This test, however, usually takes into account the value of your property.
Your home will not be included in the means test if you go into a care home on a short-term or temporary basis. If you move into a care home permanently, your home will not be included if - for example - your partner still lives there. However, this means that the vast majority of people who own their home will not be eligible for help towards the cost of a care home because their capital will exceed the maximum threshold for support. This is why many opt to sell their property or choose a deferred payment arrangement when they move into a care home on a permanent basis.
Below is a table which shows how the means test will assess your total capital, and how this can affect how much you pay towards your care home fees.
|Your capital (usually including your property)||What you will have to pay towards care home costs|
|Over £23,250||You must pay full fees (known as self-funding)|
|Between £14,250 and £23,250||You must contribute from your available income based on your means test, such as from your pension. Your council pays the remaining cost of your care home fees|
|Less than £14,250||Your council pays the cost of your care home fees|
Once all of your capital is taken into account in your means test, you must be left at least a Personal Expenses Allowance (PEA), which must be at least £24.90 per week. Your council can increase this amount depending on your circumstances at their discretion.
Can I get specialised care at home or in a care home?
NHS Continuing Healthcare
If your needs are primarily health-based, the NHS may arrange and pay for your care costs under the NHS Continuing Healthcare (NHS CHC) scheme. If you are eligible for NHS CHC and living in - or moving to - a care home, your fees could be completely covered. When assessing your needs, the council must refer you to the NHS if it appears you may be eligible for NHS CHC.
An NHS CHC eligibility decision is based on your daily care needs in relation to 4 key characteristics - nature, intensity, complexity, and unpredictability - and how these factors may impact the type and extent of care that you need. Having a particular diagnosis does not determine your eligibility, as people with the same health condition can have vastly different needs, but those with more complex or severe conditions are obviously more likely to qualify.
The initial checklist NHS CHC assessment can be completed by a nurse, doctor, healthcare professional or social worker on your behalf. Depending on the outcome of the checklist, you will either be told that you do not meet the criteria for a full assessment of NHS Continuing Healthcare and are therefore not eligible, or you will be referred for a full assessment of eligibility. You can download a blank copy of the NHS Continuing Healthcare checklist from the GOV.UK website to browse the listed requirements.
If you are referred for a full NHS CHC assessment, evidence will be collected from all relevant health and social care professionals about your physical and mental health, and social care needs. A team of health and social care professionals will assess this evidence, complete a Decision Support Tool, and make their recommendation as to whether or not you are eligible for NHS CHC. Their recommendation is given to the Clinical Commissioning Group (CCG) responsible for agreeing and funding your care package.
NHS-Funded Nursing Care
If you do not meet the criteria for NHS CHC, but still require nursing care, the NHS may pay a contribution towards the cost of the nursing care directly to your care home. You must either already be in a care home or be planning to move into one. This is called NHS-Funded Nursing Care (NHS FNC).
Most people will not need to arrange a separate assessment for NHS FNC if they have already been assessed for NHS CHC. However, if you do need an assessment or you have not already had one, your clinical commissioning group (CCG) can arrange an assessment for you.
You can find your local CCG on the NHS website.