FUNDING YOUR OWN CARE
THIS ARTICLE WAS WRITTEN BY NICKY CAVE
A recent report by the Commission for Social Care Inspection (now the Care Quality Commission) highlighted that people who have to pay for their own care are: “particularly disadvantaged by a lack of information, support and advice at every stage in making a decision about going into a care home”. This article aims to outline the key issues and options to consider if you (or your relative) have been assessed as having to meet care costs yourself.
WHAT TO DO FIRST?
You should obtain an assessment of care needs from Social Services. This will tell you the type of care that is needed and the most appropriate type of setting for it to be provided in. This could be domiciliary care (care in your own home), residential care or nursing care. Once the care assessment has been done, a financial assessment should be carried out to ascertain whether any funding would be made available from Social Services.
WILL I BE ENTITLED TO ANY FINANCIAL HELP?
Broadly speaking, if you have assets in excess of £23,000*, you will be required to meet the full cost of care yourself. The value of your property will generally be included in this unless it is occupied by your partner or a relative who is aged over 60 or is incapacitated. Some other exclusions apply and specialist advice, where a property is involved, should always be sought.
Where a property is the main asset, and other savings are less than £23,000 your Local Authority should make a contribution towards your care costs for the first twelve weeks. Their contribution may well be less than the fee being charged by your chosen care home and so a top-up will probably be required – you can use your remaining savings to pay this. After the twelve weeks, an interest-free loan may be available to you, but this is discretionary.
Even if you are assessed as a ‘self-funder’ you will be able to claim Attendance Allowance as this is not means-tested. The benefit is tax free and is available to those needing care at two rates; a weekly rate of £47.10 if you need care during the day or the night and £70.35 if you need care during the day and the night. Again, regardless of your financial situation, if you are assessed as needing nursing care, as opposed to just personal care, you should be entitled to a weekly contribution of £106.30 towards those nursing care costs. This is paid directly to the care home. If you have a complex medical condition that requires a high level of care and support or very specialised nursing support you may be entitled to a full funding from the NHS.
DO I HAVE TO SELL MY PROPERTY?
As mentioned earlier, if the property is your main asset your Local Authority may be prepared to lend you the money to pay for your care but the property would still need to be sold eventually to replay the loan.
Instead of selling, you could rent the property out but you need to be certain that you can generate sufficient additional income to meet your care fees by doing this. Rental income is taxable and if you are using an agent to manage the rental for you, they will charge fees. There is also the cost of maintaining the property to consider and the risk of having periods of time with no tenant.
Properties are selling, even in the current economic climate; the key is to get good advice and be realistic about the price you are aiming to sell for.
If the property is going to be left empty for a period of time you must make sure that your insurance policy is not invalidated. You should also arrange for council tax exemption. An experienced property management company can guide you through all these issues.
HOW MUCH IS RESIDENTIAL CARE LIKELY TO COST?
Costs vary dramatically from region to region and is also dependent on whether it is nursing care or residential care that is required. Remember though that the weekly fee is “all inclusive” and covers your food, accommodation as well as your care. Any income that you have such as your pension etc. can go towards this as you will have minimal other expenditure so that “shortfall” (i.e. the extra income you will need to find) may not be as high as you first think.
If your capital ends up being eroded down to the £23,000 threshold, your Local Authority has an obligation to fund your care from this point. They will have a maximum weekly amount that they will be prepared to pay so if the care home you are in is charging fees in excess of this, they are likely to ask for a third-party to cover the difference or they could even ask you to leave. If you have any concerns about being able to meet the private fee rate for the entirety of your stay in a particular care home, you should check the situation with them before accepting the place. You should certainly take specialist financial advice about the long-term affordability before taking on such a commitment because there are ways to protect capital and ensure you can meet the care costs for life.
WHAT FINANCIAL OPTIONS DO I HAVE?
For most self-funders, the cost of care will exceed their income meaning that they will have to use some of their savings each month to pay the care fees. Even if this capital is invested wisely, most people will see the balance decrease month on month and, in some cases, see it eroded to the Local Authority capital limit mentioned previously. This can certainly cause a great deal of financial worry and uncertainty.
There is an alternative, however, to this ‘pay as you go’ approach where you can ‘insure’ the cost of care, even after you have moved into a care home. A care fees annuity is a product that is purchased with a one-off lump sum payment.
This is non-refundable unless some element of capital protection is added, but it pays a guaranteed, tax-free income directly to the care home for the rest of your life, leaving your remaining capital ‘ring-fenced’ from future care costs.
It is possible to combine the annuity option with investments but this should only be done if there is no risk of the invested capital becoming depleting and leaving you short of income in the future.
The annuity can have built in inflationary increases or you can meet fee increases from remaining capital.
WHAT IS CARE FEES ANNUITY LIKELY TO COST ME?
Care fees annuities are individually underwritten which means there is no standard price or ‘rate tables’. The cost depends on your specific circumstances. A person’s age, state of health and the amount of income that they need from the plan will all influence the price. The older you are or the more dependent you are on others for your care, the lower the cost. The best time to consider purchasing a care fees annuity is within the first couple of months of moving into care. You can still purchase one if you have been in care for longer but the sooner it starts, the more benefit you get from it and the more capital you stand to protect.
Care fees annuities can also be purchased and used to pay for care in your own home.
WHO CAN GIVE ME SPECIFIC ADVICE ABOUT MY FUNDING OPTIONS?
Since October 2006 the Financial Services Authority has made it mandatory for any financial adviser giving care fees planning advice (whether this is investment or annuity advice) to hold a qualification called a ‘CF8’. Experience and knowledge in this area is key and so it is advisable to speak to a specialist, not just someone who holds the qualification. The care home may be able to put you in touch with an appropriate advisory firm.
ARE THERE ANY OTHER ISSUES I NEED TO CONSIDER?
If you haven’t already one so you should consider setting up a Lasting Power of Attorney so that someone else can act on your behalf should you become unable to manage your own affairs in the future.
Also, if you are married when you move into care, it may be advisable to review your Wills, leaving your respective shares of the estate to other beneficiaries rather than to your spouse. In addition you may want to review the way in which joint assets and accounts are held.
*The upper capital limited from April 2009 in England and Northern Ireland.
This article was written by Nicky Cave, Managing Director of Eldercare Solutions Limited. www.eldercare-solutions.co.uk
