Last April, new rules began in England about how the cost of staying in a care home is paid for.
The Government has announced it will defer until 2020 the cap on care home costs due to start in England in April 2016.
The average cost of a care home is £572 a week and £775 for nursing care. The actual amounts vary widely across the UK.
Read more about the cap on care fees.
Will the NHS pay?
If your main need for care is medical, then the NHS should pay the whole cost. The assessment process is complex but anyone whose primary need for care is a medical one – including some dementia patients – should have their care home fees paid in full by the NHS without a means test.
The precise rules and guidelines differ in the four home nations but a search on ‘NHS continuing healthcare’ locally on government websites should find the details.
The means test
If the NHS won't pay the care home fees, then the local council (HSS Trust in Northern Ireland) may pay some or most of the cost. Any help is subject to a means-test that assesses both capital and income.
Download our guide to the essential facts you need to know about care and funding.
Capital includes any money, shares and investments you own. Investments you cannot cash in without a penalty – such as a five year bond – are counted as capital at their current cash-in value, less a deduction for the cost of selling.
Personal possessions – such as jewellery, paintings, antiques, furniture, vehicles – are not counted unless they were bought with the intention of reducing capital.
The value of a life insurance policy is ignored and that means products called investment bonds, which include life assurance, are also generally ignored. That leads some people to put money into these bonds to try to hide it from the means-test. But that may not work. The rules are complex and may change.
Property, such as land, buildings or dwellings, all count as capital but the home you live in may be exempt.
If your total capital is more than £23,250, the local council will not pay anything towards the cost of your care home fees. (In Scotland the figure is £26,250; in Wales £24,000). If it is below this, the council will pay some or most of your fees.
Relatives can help you get better care, or more choice than the council will pay for, by topping up the amount you have available to pay the fees.
Find out more about Saga's Care Funding Advice Service.
Protecting your home
Many people fear they will have to sell their home to pay for their care. You should never have to do that while you are alive, though you may choose to do so.
The value of your home is ignored if it is lived in by your spouse or partner, or your ex if they are a lone parent; by a close relative aged 60-plus or disabled; or by a child of yours who is under 18.
The local council has the discretion to ignore the value in other circumstances, for example if a carer or other relative lives there, so it is always worth asking.
In England or Northern Ireland the value of your own home must be ignored for your first 12 weeks in a care home if you have less than £23,250 in other capital. (The rules are different in Wales and Scotland).
Otherwise, if you go into a care home, the value of your home – less any mortgage or equity release agreement – will count as capital, which will normally exceed the limit for help with the fees. But you do not have to sell your home.
Things to consider when choosing care.
Deferred payment agreements
Instead, councils in England must make a deferred payment agreement. The council will then pay for your care – up to certain limits – and the bill will clock up until you die.
Your estate will then sell your home and pay the debt. In England councils can charge interest, currently 2.25%, on the accruing debt.
Outside England the council has no legal obligation to allow a deferred payment agreement but generally it should and the debt is interest free until eight weeks after your death.
In England, the deferred payment agreement can only begin once your other capital has fallen to £23,250. Similar rules may apply in the rest of the UK with different limits.
If you make a deferred payment agreement, you may want to consider renting out your property. The profit from that will count as income and can be used towards your care costs, thus reducing the bill at the end of your life.
If you own any of your capital jointly with a spouse or partner, then only half counts as yours, but it is safer to separate your bank accounts and investments so that your partner's resources can never be taken into account to meet your fees.
If the council is paying some of your care home fees, you will be expected to contribute from your income. Some income, including certain payments from charities, may be ignored. Any pension, annuity, state pension or rental profits will count as income. If a partner depends on them, then only half will normally be counted towards your income.
If you have a personal pension fund, you will be expected to convert it into an income at around age 63 (60 in Scotland and Wales). If you do not do so, you will be assumed to have the income it could produce – called ‘notional income’.
Some forms of income have what is called a ‘disregard’. In other words some of it will be ignored – perhaps £10 or £20 a week. You will have to use most of the rest of your income towards your fees. You will only be allowed to keep £24.90 a week for yourself (Wales £25.50; Scotland £25.05). Some benefits, such as attendance allowance, will have to given up altogether.
If you pay your fees in full yourself – or have a deferred payment agreement –you can keep your attendance allowance. Self-funders who don't already get attendance allowance should consider claiming - it is £55.10 or £82.30 a week depending on the severity of your needs. In Scotland you cannot keep attendance allowance, even if you are self- funding.
Find out more about attendance allowance.
There are many plans on the market to try to protect or hide the value of assets – especially a home – from the care home means-test. They may not work and the only person sure to make money is the one who sells them.
If you deliberately deprive yourself of resources to increase your entitlement to public money, you can be treated as if you still owned that asset. So any attempt to give things away to boost council help may fail.
If you want to consider a scheme, make sure you understand all the costs, inform your heirs, and be aware it may not succeed.
Can you avoid care costs?
Download a free, handy factsheet with the basics you need to know about funding care.
Help your loved ones keep their independence at home with Saga SOS Personal Alarm service, part of Saga Healthcare. No start-up costs, no delivery charges and the first month is FREE. Find out more here