Saving for your future care: 4 things you should know to help you plan

What’s on this page? 

1. How much does it cost to pay for care?
2. Who pays for care?
3. How do you plan ahead for care costs?
4. Why might a lasting power of attorney be helpful?

1. How much does it cost to pay for care?

Improvements in healthcare mean we’re (mostly) living longer, with average life expectancies at birth up nearly eight years for men and six for women since the 1980s. But the downside of this is that some of us will need a bit more help in those extra years. 

This care can take different forms. Home care, either informally through a friend or relative or from a professional carer, can be an option. Some people might prefer to move into sheltered or supported housing. Or you might need a room in a residential care home. 

Costs vary hugely too, depending on the type of care you need and where you live. As an example, the average cost for a residential care home in England was £49,348 a year in 2023, according to PayingForCare. There are geographical differences, with average costs ranging from £41,548 in the North West to £59,904 in the South East. Add in nursing care, and the average hits £65,884 a year.

Home care costs are even more varied. In some cases you might have a relative or friend who’s willing to do this for free. If that’s not what you want, or you don’t have that option, you could pay for a private carer. According to the NHS, this typically costs around £20 an hour, although it depends where you live. Or you might be eligible for funded care – there's more on this below. 

If you need a live-in carer, that could set you back more than a care home. The NHS says that this can cost from £800 to £1,600 a week, depending on how much care you need. But some experts suggest this could be even more. “It depends on what you want and where you live, but you could be looking at figures of £100,000 plus a year,” says Tracy Crookes, Chartered Financial Planner at Quilter Cheviot. 

Successive governments have considered the question of how to reform charging for care, but but, as Stephen Lowe, Director at retirement specialist Just Group, explains, no changes have yet come to fruition. 

“A cap on care costs first proposed in 2011 was finally due to come into force in England next year, but this has been scrapped. This would have put a limit on how much people would need to pay of their own money, allowing them to plan ahead,” he explains. 

“No formal announcement has been made, but reports suggest the new government is considering a royal commission to seek a consensus on care.”  

In the meantime, doing some forward planning could help to minimise unpleasant surprises in the future. A specialist financial adviser can help you understand the costs of care and the steps you can take to be well prepared. 

2. Who pays for care?

Understanding who might pick up the tab for any future care needs can help shape your financial planning. Often the bill falls to the individual, but there are situations where financial support is available.

You might receive some support with care fees from your local authority, but this is subject to a financial assessment or means-test, and you'll still be expected to contribute. If the value of your assets – which includes income, savings and investments – is more than £23,250 in England and Northern Ireland (£35,000 in Scotland and £50,000 in Wales) you won’t receive any financial support from your local authority. “You’ll be expected to pay the full cost of care until your assets fall below the threshold,” explains David Broome, Technical Advice Support Officer for Social Care at Age UK. 

 For care at home, means testing doesn't include the value of your property, but if it's residential care, the local authority might take the value of your home into account (although not if your spouse or partner is still living there).

Where someone has complex health needs, the NHS may cover the cost of care through NHS continuing healthcare. This doesn’t happen very often, though, as Crookes explains: “The NHS will carry out an assessment to determine whether you qualify, but most people won’t.” 

There are also benefits that could help cover care fees. One relevant benefit, Attendance Allowance, isn’t means-tested. It’s payable to anyone who needs help looking after themselves. Current weekly rates are £72.65 if you need some help, or £108.55 if care is required around the clock.

“We encourage everyone to look at what they could be entitled to,” adds Broome. “Our benefits calculator can help you work out what you can claim.” 

3. How do you plan ahead for care costs? 

Armed with a rough idea of what you might be expected to pay if you did need care, you can plan for the possibility. An independent financial adviser’s input can be invaluable, especially if you’re trying to make decisions based on what you might need years or decades into the future.

“We factor care fees into cash flow modelling for all our clients,” explains Arica Gourley, Senior Wealth Planner at Killik. 

“We’ll add in care fees for the last five years of a client’s life expectancy, so they can see whether there might be a shortfall after taking into account existing income, savings and other financial streams such as a future inheritance.” 

As well as taking steps to shrink a future shortfall, it’s good to understand the financial products that can be used if care is required. 

“There are all sorts of options to help fund care,” says Crookes. “What’s right will depend on your circumstances but also your view on risk.” 

For example, you could use your home to fund care. “You may want to downsize while you’re in good health, or consider equity release if you need care at home,” she adds. “You could also consider selling your home or renting it out to cover costs.”

If you’re in a care home and the value of your other assets (not counting your home) is less than the means test threshold (£23,250 in England and Northern Ireland), a deferred payment agreement is another option. This is a loan from your local authority that is secured against your home. 

Minimal, if any, interest is charged, and the loan only needs to be repaid when your home is sold. This might be an option for you if you’re not ready to sell, or if the property market is against you.   

Another financial product to consider is a care, or immediate needs, annuity. Just like a pension annuity, these allow you to exchange a lump sum for a guaranteed income for life. As the provider takes your health into account, the amount you receive will be matched to your life expectancy. 

Gourley says there are pros and cons. “Future care costs are guaranteed to be covered but it’s a bit of a gamble: if you pass away sooner than expected, you could lose out.”

4. Why might a lasting power of attorney be helpful?

Whether or not you ever need care, there are some practical steps you can take that will ensure you’re prepared for anything life throws your way. 

As well as making sure your will is up-to-date, Duncan Bailey, Head of Private Client & Charity at Brabners Personal, says it’s also important to have a lasting power of attorney (LPA) in place.

“If you’re unable to make decisions yourself, an LPA ensures that someone you’ve chosen can act on your behalf,” he explains. 

Two different types are available – one for health and welfare and the other for property and financial affairs – and you can choose to have one or both. 

Bailey recommends thinking carefully when selecting attorneys. “Pick a person or persons you trust,” he says. “You’ll need their agreement, too.”

“You might have one child who’s great at finances, or you could put all your children down as attorneys on both LPAs.” 

There are fees to consider. Registering an LPA with the Office of the Public Guardian costs £82, and there may be professional fees too if you get a solicitor to complete the forms for you. 

For both LPAs, the fees can vary, but doing LPAs through a solicitor for a couple can cost many hundreds of pounds. 

“We always tell people where the online forms are so they can do it themselves, but many prefer the reassurance of using a professional,” Bailey adds.   

It's equally important to share your plans and thoughts on care with your loved ones. “Talk to your family about your priorities around care,” says Crookes. 

“It can be a difficult conversation, but it can bring up different angles as well as providing reassurance if they need to put your plans into action.”