Eight ways to pay for social care
Social care is in the news. How could you pay for social care if you needed it right now, long before any new proposals come into effect?
Social care is in the news this week thanks to the publication of the Dilnot report. The proposals in the report make a lot of sense but it’s important to remember that they almost certainly won’t be implemented until 2015 at the earliest. In fact, they may never be implemented at all.
Many elderly folk will go into care before the new proposals come in, so what can you do if you or your family need to find the cash now to pay for long-term care?
Here are my suggestions:
1. Get advice
It’s really important that you make decisions carefully when it comes to care, so I think it’s worth visiting an adviser who specialises in finance for care. Go for one who is a member of the Society of Later Life Advisers (Solla).
2. Use your pension
Unless you’re very unlucky, you should have some form of pension, so you can use that income to pay for at least some of your care costs. Obviously, the bigger your pension, the more you can pay towards the costs of your care.
The cost of care is yet another reason why it’s really important for everyone to save for their old age.
3. Get funding from your local authority
If you don’t have much money, your local authority will pay some or all of your care costs. However, if your assets are worth more than £23,250, you’ll normally be expected to pay all of your costs yourself.
4. Exploit your property
If you live in a care home, you might be able to rent out your home and use the cash for care. However, you’d probably need a relative or good friend to manage the rental process for you. A simpler option is to go for equity release or you could just sell the home and use the proceeds to pay for care.
The downside to exploiting property is that any children will have less money to inherit. You might say that’s not important – children shouldn’t expect to inherit anything from their parents, and anyway, parents should use their money for their health and happiness.
5. Get insurance
If you’re about to enter a care home, I think you should seriously consider taking out a care-fee plan, also known as an immediate care annuity.
You’ll pay an upfront sum to an insurance company which then promises to pay for your care costs for as long as you live. Only two providers are offering these policies at the moment – Partnership and AXA Resolution.
These policies are expensive. Partnership told me that the average purchaser pays £90,000 for a policy and lives in the care home for four years. The cost of the policy depends on the purchaser’s age, his health and the care home’s charges.
£90,000 is a lot of money, but what you get is peace of mind. If you end up living in a care home for ten years, your money will never run out and you won’t be obliged to seek aid from the state at a later date. And don’t forget, some care homes in the South of England are now charging as much as £50,000 a year, so the policies perhaps aren’t as expensive as they seem.
Looking ahead, if the Dilnot proposals do become law, future pensioners will know that the government will pay for nursing care once £35,000 has been spent by the pensioner. So the cost of care-fee plans should fall in the long-term. (That said, I should stress that under Dilnot, the government will only be paying for the nursing care, not the ‘hotel costs.’ The hotel charges can account for as much as two thirds of the cost of a residential home.)
6. Ask for NHS continuing care
If your health needs are severe, you may qualify for support from the NHS. This means that all care costs will be met by the NHS rather than you or your local authority. However, the NHS is only prepared to do this if you are seriously ill.
7. Get care at home
Getting support at home can be a cheaper option than a residential home. However, some folk need full-time support and going into a residential home may improve the quality of their lives and help them live longer too.
8. Claim the right benefits
If you’re in a nursing home – not a residential home – you may be entitled to the Registered Nursing Care Contribution. This can amount to more than £100 a week. You may also be entitled to attendance allowance and/or disability living allowance.
Hopefully, you’ll find these tips useful. I think my most important message is to consider taking out a care-fee plan. If you can afford one, they make a lot of sense.