If you or a loved one needs care, then there can be no doubt that you will be facing potentially high ongoing costs and will need help with how the system works and how best to meet ongoing care fees.
One of Autumna's trusted partners, Care Funding Guidance is a free, non-commercial and not-for-profit organisation founded to help you to understand your position and options.You can get in touch by calling them on 0800 055 6225, or visiting their site at Care Funding Guidance.
Their service is largely funded by the care home groups and so is free for families to use.
Care in the UK is means tested. If your assets are below the means test limit then you may be entitled to some state funding of your care. If your assets are above the means test then you will have to meet the cost of your care yourself.
The means test figures are slightly different in the four home nations:
N. Ireland: £23,250
If you are paying for your own care then you will may well be entitled to one or more state benefits. If you are receiving your care at home or in a residential home you could be entitled to Attendance Allowance.
If you are receiving nursing care then you will probably also be entitled to Funded Nursing Care (also known as The Nursing Contribution).
1. Are you over 65?
2. Can you show that you need some help and assistance day to day?
3. Are you paying for your own care ?
If you would like to make an application for Attendance Allowance get in touch with Care Funding Guidance. They will check your eligibility and advise you on the best way to do so.
There are two possible payment amounts under Attendance Allowance:
Lower rate: £57.30 per week
Higher rate: £85.60 per week
In order to be eligible for the higher rate you must be able to show that the you need help and assistance during the night as well as the day.
If the state starts contributing towards your care costs at any point then the Attendance Allowance payments will usually stop.
Funded Nursing Care (FNC)
In the UK nursing care is paid for by the NHS - even if you go into a Nursing Home. The way this happens is that the matron/manager of the nursing home will usually assess whether nursing care is required and, if it is, they will make an application to the NHS for FNC to be paid.
The amount is paid directly to the nursing home rather than to you and it should then be deducted from the overall gross fees.
The FNC varies depending on which of the four home nations you live in :
England: £165.56 per week
Scotland: £80.00 per week
Wales: £148.01 per week
N/Ireland: £100.00 per week
Note: FNC is almost never paid if you are in a residential home
We like to make things as simple as possible for families to understand.
Funding your care normally requires an income generation exercise. Very often, it's about using the assets you own (such as savings and/or property), to generate the additional income you need to close any gap between the cost of care and any regular income you may have.
Ada Jones is aged 88 and living in a residential home.
The fees at the home are £50,000 a year.
Ada has income (including attendance allowance) of £20,000 a year.
Her care funding challenge looks like this:
Care Fees: £50,000
Less income: £20,000
So she needs to generate £30,000 of income per year to meet the shortfall.
Ada's assets comprise:
Savings: £ 50,000
Total Assets: £350,000
This means that Ada has to find a way - or ways - of generating £30,000 a year of income from £350,000 of assets.
There are really only six different ways of paying for care. However, no one way is going to be right for everyone. It’s therefore important to fully understand how each option might work and what the pros and cons are.
We've highlighted the six different methods here but strongly recommend that you get in touch with Care Funding Guidance as they will be able to provide you with a short emailed report showing how each option would work for you.
The first three options usually involve you keeping the property and using it in some way to generate the income that you need to meet the shortfall.
1. The Deferred Payment Scheme
This is essentially a loan from your local authority. If your savings are below the means test limit then you can apply to your local authority and ask them if they will lend under this scheme. Note: They may not necessarily agree to lend.
If they do agree then they will make a contribution towards the care fees and for every pound that they contribute there will be a pound of debt (or mortgage) on the property. When you die the loan plus interest has to be repaid to the local authority.
2. Renting the Property
If you are going to keep the property then in most cases you will have to rent it out so that it is contributing some income towards the care fees. Do be careful to get an accurate estimate of what the net income will be. It is often not as much as people anticipate once all of the costs are deducted (eg: management fees, tax, repairs and insurance).
Bear in mind too, that it can sometimes be quite challenging liaising with tenants.
3. Equity Release
This option is often referred to as the ‘Port of Last Resort’ because it is usually a fairly expensive and inefficient way of paying for your care. Having said that, it can be a viable option in some circumstances.
With Equity Release you are borrowing money from a commercial lender. Usually you won’t make any repayments but, on your death, the loan plus all of the accrued interest will need to be repaid.
If you considering Equity Release you should probably look into the cost of a care fee annuity (see point 6 in this section) as this may help you to limit the amount of capital that you need to borrow.
The next three options usually involve selling the property, although this may not always be necessary where there is quite a high level of savings:
A lot of families, having sold the house, simply put the sale proceeds in the bank and leave it there. Currently, because interest rates are at an all-time global low, you are unlikely to generate much income.
£300,000 in the bank
Net interest rate of 1%
= annual income of £3,000
This simply involves trying to make your capital work a bit harder to generate more income. For most families it’s not usually advisable to take much in the way of investment risk which means sticking with safer, lower risk investments.
6. Care Fee Annuity
A Care Fee Annuity involves you buying a lifetime income that you can use to meet the shortfall. In principle you could use some of the available capital to buy the annuity which will then largely solve the care funding problem and, as the same time, help to protect the remaining capital.
The first step with the annuity is to establish what it will cost in your circumstances. Care Funding Guidance can help you with this, securing full quotations from all of the annuity companies that offer this type of annuity. There is no cost involved and there are no medicals involved either.
As a rough rule of thumb, the average cost of the annuity is around four times the annual income that you require.
We hope that this brief look into the topic of paying for care has been helpful.
On the Care Funding Guidance website you'll find a PDF version of their guide to paying for care. If you would like a copy to be posted, you can use the online enquiry form.
Most families find it particularly helpful to speak to one of the CFG team to explain their position, which means that CFG can then provide the specific guidance they need, and send a care funding options summary for further consideration.
For free, confidential advice on how to fund care, call Care Funding Guidance on 0800 055 6225.
Alternatively, visit their website at www.carefc.co.uk