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Long-term care has been put under the spotlight recently as the government tries to figure how to deal with people living longer, but not necessarily more healthily, in retirement.
Recent figures from the Office of National Statistics show that the pace at which life expectancy after age 65 is increasing is not being matched by the number of years lived in good health. Men and women who retire at 65 can currently expect to spend 56% and 57% respectively of their retirement in good health.
It’s great that people are living longer, but 40% of your retirement could be spent in ill health, so how will you pay for the care you may need?
The cost of care depends on a number of factors: the type of care you require, whether you stay in your home, and the area in which you live.
Care homes can be a good solution for those needing round-the-clock care. The cost of residential homes varies widely, and you will pay more if the home has qualified nurses rather than just carers.
The average cost of a care home is £700 per week, but prices can be far higher – homes in the South East are particularly pricey.
Care at home is an option if the person who needs care does not want to leave their home or needs day-to-day help, or 'domiciliary care'.
The average cost of domiciliary care is £10 to £15 per hour, but live-in 24-hour care is far more costly and can be equal to the cost of a care home, but with the additional expense of running a home.
Sheltered housing is for people who are able to look after themselves but would like to have an on-site warden in case of emergency. There are many options for sheltered housing, including renting, buying or part-buying, but all incur additional service charges to cover the cost of on-site support and cleaning and maintenance.
Retirement villages are another solution for those who do not need round-the-clock care but would like support. Retirement villages offer a community of similarly aged people who live in individual properties but have support for maintenance should it be needed. They also provide access to care.
As with sheltered housing, the cost of retirement villages depends on the type of property you want to buy and its location. There will also be additional service charges to cover the costs incurred at the village.
As people live longer, the government is struggling to pay for state pensions, let alone long-term care. Andrew Dilnot, a former economist, was given the task of finding a solution to the long-term care problem.
His report urged the government to spend £2 billion reforming long-term care. One of his proposals was to cap the cost of social care for individuals at £35,000, with the state picking up the bill after this threshold is reached.
It also recommended increasing the means-tested threshold for care from the current £23,250 (for those in England) to £100,000.
These recommendations are still being discussed, but the threshold is something you need to be aware of now if you are considering long-term care for yourself or elderly relatives.
Care provided by the state is means-tested, meaning that if the assets and income, including benefits, of the person requiring care are above the following thresholds then they must pay for their own care.
If residential care is needed, both the value of a person’s house and their savings will be means-tested, but if home help is needed the value of property is excluded. If you have savings below £14,250 then care is free.
The maximum amount of means-tested money you can receive varies depending on the local authority, and may not be enough to cover the full costs of a care home. For example, the cost of a care home in West Sussex is around £1,000 per week, but the local authority contributes a maximum of £431.20 per week towards care.
There will also be an assessment of need made by the local authority. The council must decide if you are of low, moderate, substantial or critical needs, with some only providing help to those who are in desperate need.
There is no doubt that financially stretched councils are making it harder to qualify for state assistance and people are being forced to take their long-term care provision into their own hands.
This can often mean selling a property to fund care, especially if a person needs residential care, where the value of the home will push them over the threshold.
Funding long-term care is a minefield. If you plan incorrectly then the money may run out, and an elderly relative may have to be removed from their original residential home and placed in a cheaper one.
If you are concerned about long-term care then seeking professional, independent financial advice is key. There are advisers who specialise in care.
There are lots of options available, including:
Care fees annuities provide a payment towards your care fees each month in return for a lump sum – much like a normal annuity. These annuities, also known as immediate care plans, can be index-linked, which means the income provided will keep pace with any increase in care fees.
The cost of a care fees annuity depends on the age and health of the customer and the cost of annuities varies between providers, so specialist advice is needed.
Equity release allows you to release a sum of money tax-free from your home in order to pay for care in your own home. This is a very tricky area and not right for everyone, so you must seek independent financial advice before opting for this option.
Income from investments is a good way to supplement the income you receive from your pension and other benefits. Seek specialist advice on whether you can invest your portfolio to provide an income stream. This would allow you to keep control of your capital while paying for care with the income; the lump sum investment could then be passed on to children.
If you have an elderly relative who needs care, or if you think you will need care in the future, there are steps you can take to make the transition easier.
A lasting power of attorney (LPA) can be drawn up before you need care, and gives a person you trust the power to act on your behalf when you are not able to make decisions.
An LPA will give your family the ability to make decisions about your care and finances should you become unable to. If you do not have an LPA and become unable to make decisions for yourself, you will be registered at the Court of Protection and a receiver will be appointed to make decisions for you – including on your finances, your welfare and your property.
Paying for Care
Association of Retirement Village Operators
Sheltered housing information
United Kingdom Homecare Association
Safe Home Income Plans
If you need information on annuities, check out our Lolly guides:
Pension: what is an annuity and how does it work?
Pension: which annuity is right for me?
Comments (2)
It seems some inhabit a parallel universe when it comes to discussing older age. We have long known that life expectancy is rising faster than healthy life expectancy. How is this news? Additionally, although the true cost of long term care might be £700 per week, you won't find a council in this land prepared to pay that. They want it as cheap as they can get it and never mind the quality. Nursing care comes in around £500 per week, or £3 per hour, for the most frail people we have. For residential care, councils pay around £350 pw, or £120 less than they charge for their own homes. If we are going to have fairness and openness in care, let's start with local authorities.
11:18 on 26 February 2012
The current system is two tier:
For those who work hard, pay taxes and buy their own home or save to provide for their old age they have to forfeit virtually all of that if they need long term care (see the figures in the article)
For those who live their lives without a care for the future, the State (taxpayer) picks up the cost of long term care. (and probably has done for some time through over-generous State Benefits for many)
Whilst the present system remains as it is, those of us who take our lives and our future responsibly must protect our hard-worked-for assets from this grossly unfair system.
There are Trusts available, (at a modest cost by comparison), that enable us to provide for our own needs on our own terms and leave us with the option to provide an inheritance for our loved ones.
If we all did this then the current "let's-have-all-your-money" mentality of successive Governments would have to be reformed sooner rather than later.
07:55 on 27 February 2012
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