The Cost of Care and How  To Fund It!

The Cost of Care is already a burning personal issue for many families.  How are you planning to pay for long term care should you or someone in your family need it?

It's becoming a major political issue as our ageing population continues to grow.  In the UK the current Coalition Government has proposed Social Care Reform which is due to come into effect in 2017.

Only someone who has assets of less than £23,250 will get any help from the state. 

This means that most people who own their own property will be classed as self funding  and will be expected to pay for their own care unless they need nursing care. 

There a few exceptions to this where the family home will be ignored.

  • If you have a spouse or relative aged 60 or over who still lives in the property and
  • if your care needs are classed as temporary rather than permanent.

Anyone who needs ongoing specialist nursing care, may qualify for NHS-Funded Care. You can find out more by downloading this PDF booklet NHS Continuing Healthcare and NHS-funded Nursing Care.

How Are You Going Fund the Cost of Care Should You Need to?

If you're going to hope the state is going to pay it's important to consider that reliance on the state takes away your choice of care home and level of quality of care you can expect.

For many baby boomers should we or anyone in our family be unfortunate enough to need care then we have to plan how we are going to cover the cost of care which can quickly rack up and erode any savings.

Currently the average cost of care in a residential care home is £531 per week which amounts to £27,612 per annum.  For nursing home care you could pay £731 per week which is a total of £38,012 per annum. 

You don't need to be a mathametician to work out that at the time of writing this article the state pension is £110.15 per week or £5727.80 per annum.  So unless you have a considerable private pension income there is going to be a considerable shortfall between income and expenditure.  It doesn't take very long before you or your family have spent hundreds of thousands of pounds for the cost of care.

It is apparant from the cases we read in the press and on the news Social care in the UK is in crisis - the system is chronically under-funded and too many elderly and disabled people are being left in desperate circumstances struggling on alone, living in misery and fear.

Social care reform is badly needed but will it go far enough to give baby boomers peace of mind?

The Proposed Social Care Reform - Care Cap Costs Delayed

The implementation of a lifetime spending cap on the amount an individual would spend on care was a promise of the former coalition government’s social care policy, and a manifesto commitment for
the present government.

However implementation of the spending cap, originally intended for April 2016, has now been delayed until 2020. This means after the next election, so this delay raises considerable doubts about whether the cap will ever be implemented at all.

Andrew Dilnot the economist who was tasked with looking at how social care could be funded proposed a cap of £35,000 on the cost of care inviduals would have to find. 

However the government decided to raise the proposed cap to£72,000.   This amount would only have been for what they referred to as hotel costs which is basically  accommodation and meals.  In addition to this the threshold of the means tested value of an individuals estate was to increase to £123,000.

The average length someone stays in a care home is between two and three years and more often than not they will need more than just accoommodation costs so the gap to fund could be a lot bigger. 

Michelle Mitchell, Age UK's charity director, says that one in ten face an annual bill of £100,000 for the cost of care.

What the reform would have done was to allow the Government to introduce a national deferred payment scheme where the local authorities would agree to pay in advance for care if an individual dd
not have the income or savings to cover the cost of care without selling their home.  The council would then recoup the money when the house was sold.

However the new Health Secretary Jeremy Hunt has announced that the plan to limit care bills from next year to £72,000 for the over-65s and for younger adults with disabilities has been delayed until 2020. This is surprising as the Conservatives used it as one of their main policies in their manifesto during the general election campaign.

While Hunt insists that his department is still fully committed to the policy – which ministers had claimed would prevent old people having to sell their homes to pay care bills – most experts
believe that it has, effectively, been abandoned.  Only time will tell.

In the meantime there is no doubt that the Care System in the UK and many other countries is seriously under pressure and in danger of meltdown and it will only get worse as the baby boomers age
and require care.

So What Are The Options for Self Funding Care?

Whether it's our parents or ourselves in the future we need to have an idea of what we could do if it becomes necessary.  So far as I can see we have various options to consider depending on the level of care that's needed.

  • Ideally With careful planning and plenty of time you could build up an investment portfolio which would be designed to pay an income.  However in these challenging economic times investments like pensions  don't always deliver what you thought they promise. 
  • When Mum's health started to deteriorate I bought in a certain amount of care a week and gradually increased it as we needed it.  This enabled her to stay in her own home a lot longer and was a lot cheaper than putting her in a home.

    You may be able to claim an Attendance Allowance which is not means tested, or a Carers Allowance if you yourself are caring for someone.  These benefits will help towards the cost of getting help and support in the home. 
  • If going into care is the only option and there are no dependents then renting out the family home could make up the short fall but then there is always a risk of not having a reliable tenant or worse can you continue to fund the costs if you're between tenants and the income simply disappears.
  • It seems that the  most popular option for paying the cost of care is to sell the family home and purchase an immediate care annuity which pays a tax free fixed income for life, provided that it is paid to the care home provider.

This will provide peace of mind knowing that the cost of care will be guaranteed to be paid for life and not run out which could mean a move into a local authority funded home at some time in the future.  If there is anything left over from the sale of the property this can then be left as an inheritance for any surviving family.  

Having to make the final decision to put someone into care is heart breaking but sometimes it's the only sensible solution.

If you find yourself in that position check out Residential Care Homes and Residential Care Homes Checklist.

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