How to start saving for care costs in later life

​Forget political soundbites, here’s how to really make sure your future is taken care of

Ignore Westminster, its time to manage your own long-term health needs (Getty)

There’s a reason social care is a hot topic for politicians campaigning in the run up to 8 June. More of us than ever will come to need it. But covering the cost of long-term care is a very expensive business indeed. State-funding rules change all the time so few of us have any idea how we’ll pay for it.

Just one in 10 of the over-45s have set aside anything to help pay for potential car costs and it’s no surprise that 40 per cent of us don’t think we’ll need to, according to research by financial planner Tilney. In fact, around 80 per cent of us will need some sort of care by the time we hit our eighties.

While wannabe MPs battle it out with soundbites, threats and empty promises, on the ground it’s time to take control of your future and that of your loved ones. If you or your elderly parents or relatives need residential care in later life, ensuring that you have the right financial plan in place can be a minefield. Decisions often need to be made in a very short time, and at a time of great emotional stress.

This pressure combined with the complexity of the system can result in benefits being missed and people being inappropriately funded, or worrying that their money will run out.

“It’s extremely complicated,” says Caroline Abrahams, charity director of Age UK. “Unless you’ve encountered the system before it is easy to feel befuddled.”

Funding for care is means-tested, most will end up paying something towards their care, but ensuring that your parent or relative is getting everything that they are entitled to in terms of tax reductions and extra benefits can make a difference to the whole family’s comfort levels at what can be a difficult time.

What do you need?

Long-term care is a very broad term, covering everything from temporary placements for those who need to recuperate from a fall or illness, to round-the-clock dementia care and end-of-life palliative care. Your family member may need different types of care at different times in his or her life, so it is important to build in flexibility to meet changing needs.

Depending on what type of care is needed, the financial picture can change. Some forms of benefit are only available to those with very severe medical needs, while different rules apply when care is likely to be temporary rather than permanent. There are also some forms of care available at home, which can be a less costly alternative to full residential care, depending on the needs of the individual, while warden-controlled or “sheltered” housing can also be an option.

A local authority care assessment is a good place to start, particularly if you are confused about your relative’s needs, and is essential if you are hoping that the council will fund any part of his or her care. The council has a statutory duty to provide this, and it should be carried out by a qualified health professional.

After it is done a care plan will provided with advice on what your love one needs, and what type of care is appropriate for them. Not all types of care home are suitable for all needs. If your relative needs nursing care’, for example, they will need a home that offers more support than an ordinary care home.

Get a financial assessment

Working out how to pay for care is complex. In many cases the council will bear some of the cost but most people will have to pay for a part of their care out of their own pocket.

Care costs can be very high. The average residential care bill is over £29,000 and the average stay is around two years, according to figures from Laing & Buisson.

For those requiring nursing care or other specific care, the bill is higher, while many people may wish to choose more expensive care homes for their relatives because they prefer the facilities or the ambience.

If you do this, you need to ensure your relative will have enough money to stay there for a potentially long time, or that your family is able to pay any proportion of the bill that is not being met by the local authority.

The average life expectancy for a man aged 65 is now 84 years, while a woman of the same age could expect to reach her 86th birthday, while many live longer, so bear this in mind when doing your calculations.

Local authorities will look at your relative’s assets and income when deciding how much they must pay towards their care. At present, if their capital and income is above £23,250 they will have to pay their own fees. Those with less than £14,250 worth of assets will have to pay nothing, and those assessed as having somewhere in the middle will pay some. If your relative is assessed as needing care in their own home, the value of the house will not be taken into account, but if they are in need of residential care this will be included if they live alone. If a partner lives there, though, or a relative over 60 or child under 18 then the value of the home will be disregarded when the assessment is made.

David Samson, from from financial hardship charity Turn2Us, says that a local authority will give one of three outcomes, “either, agree to meet the full cost of your care needs, agree to meet some of the cost, and you’ll need to top up the rest or it will leave you meet the full cost of your care”.

Many people who go into care do not want to sell their home, especially if it is far from clear how long they will need to be in care for. Local councils have to offer what is called a “deferred payment system” for those who do not want to sell their homes to pay for care. This means you can delay paying the costs of your care until a later date, and the costs can be paid after you die out of the estate. The local authority can charge interest on the scheme, currently at around 2 per cent, and are required by law to offer it. However these schemes are poorly utilised and seldom promoted. “There are some local authorities that haven’t lent out a single penny on this scheme,” says Steve Lowe, from retirement finance expert JRP.

The Tory manifesto suggests that these schemes will play a bigger part in the funding landscape in future. The party’s proposals suggest that although no-one will have to sell their home to pay for care, they will have to use a scheme akin to the deferred payment system or to current equity release schemes to pay for care. When those in residential care die, the care costs will be clawed back from their estates. However, under the Tories plan, once the value of the individual’s assets has fallen to £100,000 the government will pay the cost of care.

Choosing a home

Just because the local authority does the assessment, it doesn’t mean that you have to choose one of its homes for your relative. If you choose a more expensive care home for your relative, you may choose to pay top-up payments on top of the local authority’s funding or they, or you, can pay the whole amount. You can also choose to move your relative closer to you, if you are far away, and still receive the funding.

Take time to make the decision, and don’t be rushed, says Age UK’s Abrahams. “Even if you have the hospital breathing down your neck and saying that they want the bed, it is important to take this one step at a time.”

Entitlements

When your relative moves into a home, they may be entitled to more or fewer benefits, depending on their circumstances.

The most important thing to check is whether they are eligible for NHS Continuing Care. This is for people who have health needs, and the eligibility criteria are quite strict. There’s more information here about Continuing Care. Because it is not means-tested, and can fully fund care, it is worth checking whether your relative qualifies.

If a relative gets this funding, their other benefits will stop.

“Very few people get awarded this, but it is worth checking,” says Jeremy Davies, founder of care home-fees-planning group Symponia. Once your relative is awarded Continuing Care Funding, all other benefits will stop.

Self-funders can still claim other benefits though. These include Attendance Allowance, which Davies says often goes underclaimed, even though it is not means tested. Rates for this allowance change depending on how much care your relative needs. The lower rate is £55.65 a week and the higher rate is £82.10 a week.

You must normally have been ill for six months (unless you are terminally ill) before you can get Attendance Allowance, which is not means tested.

Pension Credit, which tops up income for older people, also often goes unclaimed. Pension credit comes in two parts, known as Guarantee Credit and Savings Credit, and your relative may be eligible for one or both. Savings Credit, is being phased out. Most people who reached State Pension age on or after 6 April 2016 won’t be eligible for Savings Credit, unless they are in a couple and the other member of the couple reached pension age before that date.

Guarantee Credit tops up weekly income to a guaranteed minimum level of £159.35 if you are single or £243.25 if you are in a couple.

Savings Credit is extra money if you’ve got some savings or your income is higher than the basic State Pension. If you are entitled to it, you could receive £13.20 extra per week if you’re single or £14.90 if you’re in a couple. However, once your relative sells his or her house to pay for care they may find they miss out on Savings Credit, as eligibility depends on having a relatively low amount of savings.

Get advice

Getting care funding right is extremely important, and involving a professional may help you to make the right decisions. Try the Society of Later Life Advisers (SOLLA) for financial advisers who are experts in care funding and other issues affecting older people.

Age UK has a free helpline on 0800 678 1174 or visit its website.