Financial planning for care home costs

When you’re planning your perfect retirement, not many people want to think about preparing for potential care home costs.

The same is true for people who are already retired. Some 93% of over-75s have made no specific provision to cover the cost of their care, according to one survey.

Why people put off considering care costs

Many people put off considering care costs – for themselves, a family member or a friend – because they find it too daunting or worrying.

However, thinking about these things now could prove invaluable for the future.

Here we look at some of the most common topics associated with care costs – and how consulting a financial adviser can help with the process.

What NHS or local authority support will I receive?

If you are seeking support for care home costs or other care costs, there is a two stage assessment process.

The NHS Continuing Healthcare assessment

First a Health Assessment is carried out to identify your wellbeing needs. This is called an NHS Continuing Healthcare assessment.

The financial assessment

The second stage is a financial assessment to gauge the level of assets available to you.

Will the NHS pay for my care?

NHS Continuing Healthcare provides full funding but only applies in very limited circumstances and only when your assets are below £23,250.

In most cases, it is sensible to assume that you will not quality for full funding, but you should still go through the process as you may qualify for nursing funding from the NHS which can help towards care costs.

Will the local authority pay for my care?

Assuming you do not qualify for NHS Continuing Healthcare, you will then need to self-fund the care costs, until your assets fall below £23,250.

Local Authority financial support can begin when your assets fall below £23,250.

What’s included in the calculation of my assets?

Pensions are not included in the £23,250 asset level, as they are seen to produce an income instead.

Your house may also be excluded, should your spouse remain in the home, or if a relative over 60 lives in the property.

Where else can I get help with care costs?

If you are paying for care (which can be the occasionally help around the home), you may qualify for Attendance Allowance.

This is available as a weekly benefit regardless of means. They may also help provide respite or occasional hours of care.

Will I have to sell my home to pay for care home costs?

Yes, you may need to sell your home to fund care home costs.

As mentioned above, the value of your home is excluded should your spouse remain in the home, or a relative over 60 lives in the property. Otherwise, it may need to be sold.

Can I rent my home instead?

In my experience, renting the property often doesn’t result in the income needed to cover care costs, so do bear this in mind when deciding how to fund your care.

Are there other ways of paying for care?

There are generally two options to consider when using your assets to pay for care:

1. Keep the money in cash or other low risk investments and draw from it as needed.
2. Purchase a care fee plan / care annuity. These products see a lump sum paid to a provider who then pays a tax-free regular payment to the care home. As with pension annuities, if you live longer than expected, these plans see you benefit; if you die prematurely, the provider benefits.

Previously, some insurers provided products for pre-funding care, but unfortunately these are no longer available.

What happens when I have less than £23,250 left?

Once your assets (excluding pensions) are below £23,250, the local authority can get involved.

What should I consider when reviewing a financial plan?

It’s a bad idea to deliberately reduce your assets to qualify for local authority funding. Having money available provides choice.

The benefits of cashflow planning

Think about using cashflow planning to assess affordability and provide financial understanding and security.

Setting sustainable pension withdrawals

When considering how much to withdraw from your pension – and when – make sure you stage those withdrawals at sustainable levels.

Protecting quality of life while planning for care

You should consider earmarking specific funds for care costs as part of your retirement planning while maintaining quality of life (and enjoyment) in the early years.

Risks of gifting property or using trusts improperly

If it sounds too good to be true then it normally is – gifting property to children or into trust can leave you vulnerable and not achieve what you want it to in terms of your care planning.

Why should I speak to a specialist financial adviser?

Getting expert financial advice – particularly at an early stage – can provide valuable peace of mind for you and your family when it comes to care costs.

At Fairstone, we have a number of financial planners (including myself) who are accredited with the Society of Later Life Advisers (SOLLA), who specialise in this type of work and would be delighted to provide assistance.

All SOLLA accredited advisers must attain the Society’s Later Life Adviser Accreditation and adhere to a strict Code of Practice.

The SOLLA Later Life Adviser Accreditation is widely regarded as the gold standard in later life financial advice.

To discuss planning your potential future care needs, get in touch with an adviser today.

Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. The value of investments can go down as well as up and you may not get back the full amount you invested. Past performance is also not a reliable indicator of future performance. Always seek professional advice before making financial decisions.