Long Term Care
The longer we live the more likely we are to need long–term care later in life – and most of us are now likely to live longer than we would have in the past. While many of us have watched the older generation grow old and need long-term care, the inevitability of ageing is generally not something we like to think about in advance.
However all is not yet lost – there are some options for funding long-term care even if they are varied and can often be complicated. So if you or a loved one need to pay for care at home or in a care home, it’s important to know the facts. The cost depends on your health and mobility, what level of help and support you need and the value of your savings, assets and income. You could end up paying for all of it, some of it or nothing at all. People often have to make quick and difficult decisions about their own or a loved one’s care needs. Thinking about the options in advance will help in the long run.
There are three main options:
NHS Continuing Care:
If you have a high level of care needs, say as a result of disability, accident or illness, you may be eligible for free Continuing Care, a package of healthcare that’s arranged and funded solely by the NHS and provided for you at home, or in a hospital, nursing home or hospice. You’re more likely to qualify if you have mostly healthcare needs rather than social care needs, relying on a qualified nurse, rather than a carer.
Local-authority funding for long-term care:
Your local council may be able to assist you with the costs of residential care or help you stay in your own home by providing support for carers, equipment and specialist services. Exactly how much funding you receive will depend on your individual needs (based on a care-needs assessment) and how much you can afford to pay towards the costs of care yourself (based on a financial assessment). Your local authority or trust can arrange care services for you or you can opt to receive direct payments and organise things yourself.
Self-funding:
The biggest fear about funding your long-term care is likely to be that you’ll be forced to sell your home. Firstly, it’s important to claim any benefits you’re entitled to. Attendance Allowance and Personal Independence Payment are the most common but there are many more you should be aware of.
Your self-funding options depend to a great extent on your circumstances. You may not qualify for funding from the NHS or your local authority. Even if you do, the amount you receive may not be enough to completely cover your care costs. If this happens, you’ll need to think about how you are going to top up any contributions, or pay for it all yourself. Whilst we might not like to think about it, long-term care is another area of finance where it pays to be prepared!
The key question is how do you pay for the cost of long term care? The stock answer used to be ‘sell your house’ but the vast majority of people don’t want to do this, as there may very well be a spouse or partner still living in the house, or they may – understandably – want to pass the house on to their beneficiaries.
At PWS ltd we are able to consider the most common forms of planning for long term care which will hopefully help clients to plan for the possibility of care – and to look ahead with some degree of confidence and reassurance.
Saving for future care costs:
This, of course, is the textbook answer. Make sure that you have a good pension in place and/or save tax efficiently through an Individual Savings Account – and start saving early, so that compound interest has time to take effect. If you save in this way the savings don’t specifically need to be for the cost of long-term care, but the money will be there if you do need it for that purpose.
The problem is that most people don’t like saving for the cost of long term care. Psychologically, it’s like critical illness cover: individuals are quite willing to acknowledge the need for long term care and they’re quite willing to acknowledge the cost of it. The thing is, it isn’t going to happen to them…
An annuity:
By the time clients reach retirement their financial planning picture is usually much clearer – and it is at this point that many choose to make provision for the possible cost of long-term care. Buying an annuity means that you will have a defined income for the rest of your life, which can be used to fund part, or all, of the cost of care. Remember that independent advice is essential if and when you buy an annuity: there are now a very wide variety of options with annuities, and it is essential that you purchase one which meets your financial planning needs.
Equity Release:
Many people reach the latter stages of their life “property rich and cash poor.” In the circumstances equity release – releasing cash from your property to be repaid on your eventual death or on the sale of the property – seems like an attractive option. It is estimated that around 7% of all equity release arrangements are to fund the cost of care, but it is not a decision to be taken lightly. There will be setting up costs, and you will also have to pay interest on the money ‘released’ which will roll up until the eventual sale. Again, it’s an area where independent financial advice is absolutely essential.
Deferred Payment:
This allows people who don’t want to sell their home immediately to move into care, with the local authority paying the costs of care and reclaiming them when the house is eventually sold. This option is only available if you have insufficient income to pay for your care and savings of less than £23,250 excluding the value of your property.
Make sure you are claiming the benefits you are entitled to:
This may sound obvious, but the benefits system is complex, and it pays to make sure that you are not one of the millions of people who don’t claim the benefits to which they are entitled. However, benefits are simply not going to pay the full cost of the care you want, which brings us back to the need for financial planning…
No-one wants to go into care – but sadly it will become a reality for many of us. If you do have to go into care, what you will want above all things is choice and control: the care you want, delivered in the location you choose. The only way to guarantee this is to plan for the cost of it and, as always, we will be happy to sit down with our clients and look at all the options and possibilities.