Home and dry?

Julie Selbie-Clark DipFA shows us how to plan financially for our futures

Home and dry?

Julie Selbie-Clark DipFA shows us how to plan financially for our futures

Meeting the cost of residential and nursing care in old age is a growing issue for many people in the UK. As life expectancy continues to lengthen, more of us can expect to require some form of long-term care.

How much does care cost?

Whether you are a relative or someone who needs to plan for their own later years,

the costs involved can be daunting to say the least. The average cost of residential care in the UK is now estimated at �24,908 a year. If nursing is also required, this can rise to �34,788 a year*. While the State can help with some costs, eligibility for help is limited and many people find themselves over the threshold at which state support is provided.

Most of us would like to stay in our own homes – and local authorities try to enable this for as long as possible, but care at home can still be costly. The average cost of home care is �17.30 an hour,^ just two hours of daily homecare could amount to more than �12,600 a year – not taking account of higher rates for weekends and public holidays. If 24-hour care is required at home, costs could rise to more than �150,000 per year based on the above hourly rate.^ In these circumstances, residential care is usually more cost-effective.

Qualifying for support

State assistance with the cost of old-age care is means-tested – primarily by imposing upper and lower capital limits on the value of a person’s savings, property and other assets. In England, for example, if an individual’s assets including any property have a total value of less than �14,250, care bills will be paid in full by the State. If personal assets exceed �23,250, an individual will normally be expected to pay for their own care in full.

Financial assessment

Local authority means-testing will look to include most capital and savings held in an

individual’s name including:

Savings and investmentsIncome from State, Personal and Occupational PensionsProperty or Land (Less any mortgage)

Jointly-held savings and assets will be usually divided by two to calculate an individual’s share.

Some assets are disregarded by the means test, including:

Surrender value of life policies/annuities;Some investment bonds with a life assurance element Property that continues to be inhabited by a partner, dependant or certain other parties, or for the first 12 weeks of permanent admission to care

With such high costs for care, people are often tempted to transfer assets to family members, to avoid paying for care, this is seen as “Deliberate Deprivation of assets” and local authorities have the power to recover these monies or assets.

Reforms to funding care

In July this year the government published a white paper setting out reforms to the funding of care.

The good news is that from April 2015 a “single set of national standards” for assessing what care someone needs, will come into force which will put an end to the postcode lottery of qualifying for care.

From April 2015, there will be a deferred payments arrangement which will avoid people having to sell their home, it is expected that local authorities will fund this by charging interest, possibly around the same rates as equity release.

The commission found that provision of information and advice is poor, that people are unaware of the support and services available to them and struggle to find financial information and advice, the government are therefore establishing a working group, including financial advisors and carers, to ensure people have the right information to help them financially plan for care.

However, the government’s response to economist, Andrew Dilnots recommended reform of putting a cap of fees of �35,000 with accommodation costs on top of this, is that no decision will be made until the next spending review with changes being introduced in 2015. Ministers are now talking about �100k cap, with people making a voluntary payment upfront to qualify for any capping on costs, if care was needed.

For those currently paying for care the proposed changes will be of very little consolation, and with the changes on how care will be paid still very much a topic of debate we will all end up paying a heavy price for care in the future.

* Laing and Buisson, Care of Elderly People, UK Market Survey, 2009

^ Live-in care cost estimates by Partnership

Complete Advice Services, 6 The Retreat, Leamington Road, Broadway, WR12 7DZ, tel: 01902 421114 / 07879 683411, email julie@completeadvice.co.uk or visit www.completeadviceservices.co.uk