Paying for long-term care is a minefield, and the costs can run into hundreds of thousands of pounds. As ROBIN POWELL explains, if you’re thinking about care for yourself or for a loved one, it really does pay to speak to a financial planner.
There are several worries people have about growing old, but one of the biggest is paying for long-term care.
Will I be able to afford it? Will I have to move to a cheaper care home if my money starts running out? Will I have to sell my house? Will it leave my children with a greatly reduced inheritance or even none at all? These are all questions people need to ask themselves as they approach their later years.
In fact, paying for long-term care is a topic many find hard to discuss. Research commissioned by Just Group for its tenth anniversary Care Report, published in December 2022 found that nearly eight out of ten (79%) people over the age of 45 have not thought about care, planned for it or spoken to their family about it. The proportion was almost as high — 74% — for the over-75s.
The researchers found there were several reasons why people hadn’t thought about paying for long-term care. Many felt they were too young to think about it, while others simply found the subject too depressing.
Something else the Just Group’s report highlighted is that ignorance and confusion about the current rules on paying for care is very common. That is certainly our experience here at rockwealth. We find there are many misconceptions that people have about this subject, and here are nine of the biggest ones.
The BAD news
It’s impossible to sugar-coat the challenge facing every family when it comes to long-term care. Good quality care does not come cheap, and if you end up living for a long period in a residential care or nursing home, it’s going to cost a very substantial sum of money.
Misconception No. 1: Your family will be able to look after you
Many of us would like to think that if we need looking after in old age our children will be able and willing to do it. This might well be the case and, for some families, it can be a good solution. But you certainly cannot take it for granted that things will work out as planned. You might get on well with your children now, but will that still be the case when you actually need caring for? Will their partner or their own children want you living in their home? And will they be able to manage if your personal needs grow? It’s very hard indeed to look after a loved one who needs constant nursing care or is in the later stages of dementia.
Misconception No. 2: Your pension will easily cover the cost
Be under no illusion: the cost of residential care is very substantial. In the UK there are about 154,000 self-funders, or people paying for care with their own money. According to one report, they pay an average of around £50,000 a year, but prices have risen sharply in 2023. In some parts of the UK the annual cost is now nearer to £75,000. To pay those fees out of your retirement income you’re going to need a pot approaching £1 million.
Misconception No. 3: The state will eventually pick up the tab
Unlike the National Health Service, the adult social care system in the UK is means-tested. Although local authorities do provide funding for residential care, it’s only those with no, or limited, ability to pay who benefit. Currently, you are unlikely to receive any funding from your local authority until your assets drop below £23,500 (the figure is higher in Scotland and Wales).
Misconception No. 4: New rules will substantially reduce the amount you pay
In September 2021 the Johnson government unveiled what it claimed was the biggest shake-up of the social care system for more than a generation. That included an announcement that no one going into care from October 2023 would have to pay more than £86,000 towards the cost. But that change was postponed by the Sunak government until October 2025. Also, the £86,000 cap is on the cost of care only; in other words, the cost of bed and board in the home do not count towards it. It will probably take three or four years of care to reach the cap, which is longer than most people stay in a home. So even when it’s finally introduced, the proportion of care home residents the cap will benefit will be relatively modest.
Misconception No. 5: You can protect your savings from the local authority
Given the cost of care, many people try to protect or even hide their money from the local authority. Some companies will sell you a scheme which involves putting your home in a trust, so that it will escape being counted as your personal asset when you’re means-tested. But, in reality, such schemes don’t work, because councils get round them by applying what’s called the “deliberate deprivation of assets” rule. So, by signing up, you’re wasting your money, and possibly subjecting your heirs to the additional expense of taking your home out of the trust when you die.
So, that’s the bad news. But things aren’t quite as grim as you might be thinking.
The GOOD news
Misconception No. 6: Residential care is the only option
It used to be that residential care was the only option for those who couldn’t care for themselves and whose families were either unable or unwilling to look after them. But in recent decades there has been a significant growth in domiciliary care, or care that is provided in your own home. You can, for example, pay for carers to help you with housework, making meals and keeping yourself clean. You can also pay for live-in or 24/7 care, although that’s considerably more expensive than paying for individual visits. As well as allowing you to stay in your own home, domiciliary care gives you much more independence than residential alternatives.
Misconception No. 7: You may be forced to sell your home
One of the biggest fears people have about paying for long-term care is that they might be forced to sell their home. For an older person, leaving their home and all the memories it contains can be very unsettling. It’s the right thing for many people to sell their home in order to pay for the best possible care, But the bottom line is that you won’t be made to sell your home, even if it’s empty. You can, if you want to, let the council find you a home, and request a deferred payment agreement, in which case the cost will be paid from your estate.
Misconception No. 8: Most people need full-time care eventually
It’s by no means inevitable that you will end up in residential care. In fact, most of us will never go into a home, and will die either in our own home or in hospital. There are around 12 million people in the UK over the age of 66, but only about 360,000 of them are in residential care. Also, if you do go into a home, it’s unlikely to be for a long time. The average stay in a home is around two-and-a-half years.
Misconception No. 9: You can’t protect against unlimited costs
So, you might be thinking, the average stay in a home is two or three years, but what if I live to 100, incurring vast long-term care bills in the process? How can I avoid losing everything I’ve worked and saved for? It is indeed a sobering prospect. But for those who are worried about catastrophically high care costs, there is an option, and that’s to buy what’s called an immediate needs annuity. In exchange for a lump-sum payment to an insurance company, you are guaranteed to receive regular payments for the care you need, for the rest of your life. But remember, if you die sooner rather than later, you probably won’t receive the amount you paid for the annuity in the first place.
Seek professional advice
As we’ve seen, paying for long-term care can be a minefield. There are very large sums of money involved. What’s more, the rules are complicated and liable to change.
That’s why it always makes sense when making plans for paying for long-term care — either for yourself or a loved one — to consult a financial planner regulated by the Financial Conduct Authority.
Each person is different, and so too each family. The best course of action in your case will depend on your specific circumstances and what you really need and want.
A financial adviser can help you identify those needs and wants, and present you with the most appropriate options. They can help you minimise the chance of running out of money and losing control over the nature and quality of the care you receive. And they can also ensure that you’re taking advantage of any state benefits you might be entitled to.
In the meantime, they can help you to retain as many assets as possible — to use, invest, gift or leave to beneficiaries in a will.
Remember, paying for long-term care is a subject that it’s all too tempting to put off thinking about. But it’s essential that you do think about it — not least because you or your loved ones might suddenly have to make important decisions.
The best time to plan for long-term care is today. And the best first step? Make an appointment with a financial planner.
CAN WE HELP?
If you’re thinking about paying for long-term care, either for yourself or for a family member, and would like to speak to us about it, then get in touch.
Based in Brighton and London, we serve clients across the South-East of England, and we are here to help you.
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