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Advice on care

Experts in paying for care

Paying for care

Paying for a care home is expensive and can all too quickly consume all of your savings.

advice on care

What options are there to pay for a care home?

Unless you qualify for ongoing NHS Continuing Healthcare, you will be financially means tested to see if you need to pay for your own care.

With the current means testing thresholds being so low - £23,250 England, £32,750 Scotland, or £50,000 if you live in Wales (2023-24) (including the value of any home -if you are single, widowed or divorced, it is not surprising that many people are assessed as needing to pay for their own care and will be classified as a “self-funder”.

No one likes having to pay for their own care but here at Advice on Care we aim to make paying for care as easy and affordable as possible.

Paying for Care - What options do I have?

If you do end up paying for care, depending on whether or not you wish to keep or sell any former property, there could be as many as 7 different possible funding strategies for paying for care , including:-

Strategies if wanting to keep any former home

Deferred Payments Scheme

Providing your need for care is likely to be permanent and you are assessed as needing a care home, should the value of your other liquid assets (NOT including your former main residence) be less than £23,250 (England) £50,000 (Wales) £20,250 (Scotland) -2023-4, you should be able to claim a Deferred Payments Arrangement from your Local Authority to help fund the fees.

A Deferred Payments Arrangement is a special type of loan, where your Local Authority will pay your care fees on your behalf whilst you wait to sell your home, or even let it, when they would expect any debt plus interest, to be repaid at the earlier of selling your home or when you die.

If granted, the Local Authority ensures they recover any care fees they have paid, by placing a legal charge on your property so it can’t be sold without your solicitor re-paying them the money from any sale proceeds.

Not only does a Deferred Payment Scheme offer the advantage of not having to seek an immediate sale and if you prefer, also allows you to let the property in the meantime, it can also preserve the most money if care is only required for a short period. It does, however, place responsibilities on families/relatives to maintain the property and you will incur some interest although this is quite low.

To find out more about Deferred Payment scheme visit our dedicated page Deferred Payments Scheme.

Letting out the property.

Only an option if care at home is not required, it has the advantage that any income generated can help meet care fees but the income is taxable and when finally sold you could also end up paying Capital Gains Tax. So unless the income generated is sufficient to fully meet any shortfall between income and care fees, you may deem the costs of getting any property ready to rent, plus the ongoing responsibilities of being a landlord and the uncertainty of income, makes this an unsuitable method of paying for care.

Releasing equity from your home

Particularly suited to those paying for care in their own homes, equity release schemes allow you to release a sum of money from your home whilst you remain living in it and gives you the option of not paying any monthly interest on the money borrowed. Instead you can allow it to be added to the debt so the debt increases and is only repaid when you (or the last applicant in cases of joint lives) move permanently into a care home or die. However the money released may not be sufficient to continue paying for care for as long as required. The debt plus interest (if not paid) will also inevitably reduce what you leave for beneficiaries.

Please note: If you are single by the time you go into care and have an existing equity release you will not be able to rent out the property to help paying for care. This is because normal equity release schemes need repaying within a certain time period after the sole or last applicant moves into care (typically 12 months).

However, if you haven’t already taken out an equity release scheme before entering a care home, we do have some schemes which would allow you or your appointed Power of Attorney to take one out to pay care fees or to modernise your home to allow it to be let and use the income received towards paying for care.

To find out more about equity release and in particular these specialist equity release schemes, visit equity release page.

Equity Release will reduce the value of your estate and can affect your eligibility for means tested benefits.

Paying for care strategies which may only be possible once you have sold any property

Paying as you go directly from capital

Here you simply pay any shortfalls in weekly fees from savings/capital which are either just kept on deposit or invested. This will be the least expensive option of paying for care if the care required is only short term. However it but can erode savings the most and causes uncertainty over whether any chosen care can be maintained for as long as required. Should money run out it can even potentially lead to having to move care homes, which of course is something that should be avoided at all costs. It also means someone will have to continually manage the money to try and get the best returns and preserve it for as long as possible and also pay any care home. Not only this but any income, or interest earned on any money may be taxed.

Investing to provide income

Similar to paying as you go, but here instead of keeping money safely in deposit type accounts, you arrange for an investment to provide an income to help meet all or some of the care fees.

The main advantage with this is that potential returns may be greater than if money is simply held on deposit. However due to volatility associated with any investing, any portfolio created, would normally be still be heavily weighted in favour of low to medium risk investments to try and reduce the risk of capital falling due to adverse market conditions. Nevertheless any income produced will not be guaranteed and can reduce and certainly will not increase each year (unlike the care fees).

You may, therefore, decide that securing your own or a parent or relative’s care, is more important. If so then investing may not be right or at least should be only considered for any balance of money after first ensuring paying for care has been secured possibly by buying a care fees annuity.

The value of investments and the income they produce can fall as well as rise .You may get back less than you invested.

Buying a Care Fees Annuity (or care fees funding plan)

Care Fee Annuities are very simple but very effective and very tax efficient means of paying for care because they:

Ensure money will never run out and care fees can always be paid.

Give you peace of mind that your chosen care can continue indefinitely.

They do this by paying a guaranteed income (chosen by you) will always be paid for life in return for you paying an insurer just one single premium at outset. What’s more, providing the income is paid to a registered care provider, the income is tax free.

Care Fee Annuities can be purchased to pay for care at home or in a care home and are portable - so will continue to pay to any new care provider.

The only risk is that the premium is based on how long the insurance companies feels the person needing care will require care. Should you care turn out to be shorter than the life insurer calculated, you will lose some money. This mortality risk can be minimised by electing to pay a little extra to provide for some decreasing capital protection, so that either 25, 50 or 75% of the premium – your choice, will always be paid out either in the form of benefits paid to the care provider, of if death occurs before this, having any remainder of the guarantee returned to the estate.

If you pay a little extra you can also ensure the income will increase each year to meet future increases in care fees. To discover just how much an annuity would cost, simply complete our quote request form and we will obtain all possible quotes for you FREE OF CHARGE and without obligation.

You can also read more about how care fee annuities work, by visiting care fee annuities or by downloading a complimentary copy of our guide here.

To find out more these smart ways of paying for care visit care fee annuities. Alternatively to download a copy of our free guide to Care Fee Annuities (or care fee funding plans) complete our online enquiry form.

Selling any former home and buying a cheaper one to rent out.

An option where the former home is quite valuable and no one will remain living in it, this can help release some money (possibly to buy an annuity).

This option will also avoid possibly having to renovate any former home just to let it.

Alternatively if you don’t mind the hassles and tax implications of being a landlord, any money raised from selling the former home could even be used to buy a cheaper and perhaps more suitable letting property to generate income towards the care fees or to reduce the amount of any annuity required, making an annuity option cheaper to buy.

Obviously such a strategy will face all of the same issues and ongoing responsibilities that simply renting has (see letting out property under "strategies if you want to keep property" which appears above.

Request your Care Fees Consultation

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