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Paying for care

Paul Lewis / 23 May 2019 ( 30 July 2019 )

The cost of care in later life is a major worry. The fear that, in just a few years, average care-home fees will take all the wealth accumulated in a lifetime. Paul Lewis separates the myths from the reality

Unlocked bank vault with a house inside
There's a fear that care home fees can eat up the assets accumulated over many years.

Most people do not go into a care home at the end of their lives – only 14% of those over 85 do so. Nevertheless, the cost of care in later life is a major worry for us all. There is a natural fear that, in just a few years, average care-home fees will take all the wealth accumulated in a lifetime. Paul Lewis separates the myths from the reality.

Who has to pay for care?

Average weekly care-home fees range from around £650 for residential care only to £900 upwards for nursing care. The rules about who pays are complex and are different in Scotland and Wales from England and Northern Ireland. When someone needs care they are assessed by their local authority.

If it decides residential or nursing-home care is needed, it will assess the income and capital owned by the individual. Before that happens (except in Scotland), the individual should be considered for ‘continuing healthcare’, paid for by the NHS. That should always happen when someone goes straight from hospital into care. If their principal need is physical or mental healthcare, rather than personal care, the NHS should continue to pay for it in full and without regard to wealth or income.

Separating personal from medical care is hard – especially with a degenerative mental disease such as Alzheimer’s. But there comes a point where the need is mainly medical: then the NHS should pay. In Scotland it is called hospital-based complex clinical care and different criteria apply.

Can you avoid care home fees?

Means test for care

If the NHS does not pay, the care given is subject to a means test. First, the person’s capital is assessed. If that exceeds £23,250 in England and Northern Ireland (£28,000 in Scotland, £50,000 in Wales), no help with the cost of care is given. If they own their home, the value of that almost always exceeds these limits. That leads to fears that the home will be ‘taken’ to pay for care. It won’t.

Its value is ignored completely for the first 12 weeks. After that, it is ignored if their spouse or long-term partner lives there. It will also be ignored if a relative who is aged at least 60 or disabled lives there. If someone lives there who has been caring for the individual, then the local council will usually ignore its value. So, in all those cases the house or flat is safe.

If none of those apply, the value of the house or flat will be counted as capital. But even then the house does not have to be sold. The local authority must provide care and offer a ‘deferred payment agreement’ (DPA), which means the bill is not paid until the person in care dies or decides to sell the house. A low rate of interest is charged, but it gives relatives the chance to rent the home out to help to pay the fees. Then, once the care bill is paid there is some value in the house to share among the heirs. A DPA cannot be taken out until other capital assets fall below the limits. DPAs are only compulsory in England. They are widely available in Scotland and Wales. In Northern Ireland, ask the Social Care Trust.

Other capital

The other assets counted as ‘capital’ are any savings or investments owned by the person in care. If there is a spouse, it is much better to separate any investments or savings so that each owns part of them. The fees are then paid only from the assets of the person in care and will run down more quickly to the level where help is given. A spouse or other relative cannot be compelled to pay care-home fees for a loved one.

Once capital falls below the limit most of the care costs will be paid, but the person in care must hand over their income except for £25 to £30 a week for themselves, depending where the home is. There is also a contribution from capital of up to £40 a week (except in Wales) until capital falls to £14,250 (£17,500 Scotland).

In Scotland local councils will pay £177 towards personal-care costs and £80 a week towards nursing care for people in care homes.

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Care self-funders

People who pay for themselves – ‘self-funders’ – will be charged more for the same room in the same care home than if the fees were paid by the local council. The difference can be as much as an extra 50%. That is partly because local authorities take a lot of rooms and get a discount. The other reason is that the amount local authorities are willing to pay is less than the cost of providing the care and that has to be subsidised by people who pay their own fees.

People aged 65-plus who pay for care can claim a benefit called attendance allowance of up to £87.65 a week (though not in Scotland).

Hiding your assets

Some people consider giving their house or flat away to a son or daughter to ‘hide’ it from the means test. That does not work. Any asset given away with the intention of boosting entitlement to state help is counted as ‘deliberate deprivation’ and the local council will count the value of the home. That applies whether you put the house into a trust or give it directly to the heirs.

Avoidance schemes

Some firms make a lot of money selling schemes to protect the value of a home from the means test, and claim that tens of thousands of people are forced to sell their homes to pay for care. This is not true, though of course some do. The schemes are usually sold at meetings in hotels and other venues to crowds of anxious people in their sixties and seventies.

These schemes cost thousands, even though they probably will not work. They are based on putting your home into a trust – a legal device so the property is owned not by you but by the trust. The theory is that, as you no longer own your home, it will escape being counted as an asset when the means test is applied.

However, this wheeze is defeated by a rule called ‘deliberate deprivation of assets’. If you take any steps to get rid of what you own, and part of your motivation is to increase your entitlement to help from public funds, then the asset can still be counted as yours. In other words, even if your home is owned by a trust, the local council could count it as if it is yours and refuse to pay your care-home fees. Buying a scheme of this sort is money down the drain – or rather commission into the pocket of the person who sold it to you. The firms selling these schemes are unregulated and there is no one to go to should you wish to make a complaint.

Most people who buy such a scheme will never find out whether it works or not. The great majority of people do not go into a care home. They die in their own home or in hospital.

Legitimate ways to keep your home

The truth is that no one has to sell their home to pay for their care while they are alive.

First, if your spouse or partner lives in your house or flat then its value is ignored anyway. That is also true if a relative over the age of 60 lives there or a younger disabled person who has been a dependant. If your previous carer continues to live there, the local council can also ignore the value and often will.

Second, the NHS may pay the entire cost of the care home. It is called ‘continuing health care’ and should happen if your primary need for care is a medical one. Of course, a cash-strapped NHS will not always fulfil its obligations easily, but last year 28,600 people in England did have their care-home fees paid in this way. Alternatively, you may get an NHS-funded nursing care contribution towards the cost.

Third, even if none of these apply and you have to pay for your care, you do not need to hand over any money while you are alive. In England, if you have less than £23,250 in savings – apart from the value of your home – your local council must let you defer the payment. The unpaid fees clock up until you die and the money, plus some interest, is then repaid from your estate. Meanwhile, your home can be rented out and the income used to help pay your fees. If you have more than £23,250 in savings, you can pay your fees out of that and when your savings fall to that limit you can get a deferred-payment agreement. Outside England there is no legal right to defer but local authorities will normally allow it. Deferment is expensive for the council, so you may have to insist on it.

Selling your house

If your home is empty, then of course you may choose to sell it and pay your own fees in order to get the quality of care you want. If you rely on the council, you may find the choice and the conditions are limited. Even if the council does pay your fees, relatives can top them up – if they can afford to – so you can get a better standard of care.

Another option is to buy an Immediate Needs Annuity. This will pay the shortfall between your income and the cost of care. Typically you’ll pay around £130,000 for a guaranteed £2,500 a month for life, which can be inflation- linked. It can cost much more or much less than that, depending on individual circumstances. It’s imperative you buy one only through a regulated financial adviser.

People who pay their own care-home fees (self-funders) – and there are more than 170,000 of them – pay higher fees for the same care as people whose fees are paid by the council. Healthcare intelligence company LaingBuisson estimates local councils pay £486 a week for residential care that would cost self-funders around £700. This is because the councils refuse to pay care homes the sums they claim they need, with the result that self-funders subsidise their costs.

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Find out more about paying for care

Independent Age

Age UK 

Care Info Scotland 

For legal help, visit Hugh James and search ‘nursing care fees’

You can get advice in England from the NHS; search ‘continuing care’.

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The opinions expressed are those of the author and are not held by Saga unless specifically stated. The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.