‘You Asked’ is a series of insights from the boosst team. You, our clients, have a wonderful ability to ask relevant and thought-provoking questions… which are often (but not always!) related to financial planning. boosst is a trusted source of knowledge and independent advice, so it makes sense that you come to us with a broad range of questions – which can vary from ‘Which car should I buy?” to “What’s the best way to teach our children about money?”.
This ‘You Asked’ post was written by Gabby.
You Asked: Planning for Care
The topic of care is one that is regularly discussed in our planning meetings. Great consideration must be given to the range of potential care outcomes that you could face. We thought it would be useful to answer some of your most commonly asked questions and give you an update on the recent changes to care legislation.
This insight focuses on funding your own care but if you’re planning for the needs of a loved one, take a look over here: link.
So, what does care cost?
Before diving into the costs, it’s important to know that there are a number of options when going into care. Often this is driven by your needs, but if you have specific wishes, or a certain care home that you would like to go to, it would be worth making this known to your loved ones as ultimately it could be them making the decision.
The cost of Residential care varies greatly and predominantly depends upon the following:
- Type of care (standard residential or nursing etc)
- The amount of care/complexity of the care needs
In England, the average cost of standard residential care in 2020 was £681 per week, and the average cost of nursing care was £979 per week. Fees vary greatly within England, so the cost will be higher in the South East when compared to the North West. I’ve shown a breakdown of the average fees for our local counties below:
|Residential Only||£747 per week||£662 per week||£752 per week||£1,038 per week|
|Residential with Nursing Care||£1,052 per week||£1,024 per week||£1,016 per week||£1,236 per week|
A care home that provides on-site nursing is more expensive, as they have a qualified nursing team to provide medical care for residents. Those with greater care needs, for example dementia, will need to be in a care home where they can provide around the clock care and support, which is more expensive.
There is the option to remain in your own home and pay for weekly, daily or live-in carers. This can be a long-term option or a stepping stone towards eventually moving to residential care.
The average hourly rate for Home Care in the UK is c£20. In London and the South East, you can expect to 50% more.
If you require overnight care in your home, then the hourly rate will be increased by up to £5.
So as an example; if you required Home Care for 3 hours per day at a cost of £20 per hour, this would cost around £1,825 per month. If you subsequently want to add overnight care for 4 nights per week (40 hours), this could add an additional £4,300 per month, based on £25 per hour.
Retirement Villages with Care
A Retirement Village is another option, and provides a community-based way of life. This is becoming increasingly popular in the UK, as it allows you to remain in your own space yet still receive access to a high level of care. Retirement Villages can be a good option for couples who want to remain together, especially where one person needs more care than the other.
It’s important to note that not all Retirement Villages provide care, so it is worth doing your homework first.
The cost to live in a Retirement Village can vary greatly. The first choice is whether you buy or rent one of the properties (often 1 and 2 bed apartments). The cost will typically depend on the demand for the specific village. There will be some things which are ‘included’ with owning/renting one of the properties, for example access to on-site facilities (gym, cinema, cafe etc), wellbeing services and community events. You will then need to pay for specific care needs, which tend to be similar to the costs of home care, but a little cheaper due to nurses living on-site.
boosst Tip – We have seen many clients inherit a retirement village property but struggle to sell due to the limited market (over specific age and wanting to live in a retirement village), the constant supply as occupiers inevitably die, the high service charges and management companies promoting units they own. Therefore, renting may look expensive but it could be more cost effective when total costs considered.
How long could I be in care for?
The average stay in a residential care home is 30 months (2.5 years). Some will spend much less time in care, whereas others will spend much longer. This uncertainty is why planning for care in later life is so difficult.
Home Care can be much longer, as individuals often begin care at home gradually with just a few hours per week to assist with daily tasks.
Who will pay for my care?
This will depend upon how you have reached the point of needing care. If this has come about by you already being in the NHS system due to health needs, then you should start by asking to complete a Continuing Healthcare Checklist. It is vital that this is requested before you are discharged from NHS care, as this is the only way to find out if you are entitled to free care funding. You can learn more about the CHC process here.
The basis for this is that if your needs are primarily health needs, you are entitled to NHS continuing healthcare funding to meet the cost of your care in full, whatever your financial situation. This can result in an extended stay in hospital with better care, so this option should be explored first before reverting to the Local Authority / Social Services.
If this option is not available, then how much of the cost you will have to personally fund will depend upon your finances and assets. The local authority will perform a needs assessment and then a means test is carried out to review your savings, assets and income.They will ask about your earnings, pensions, benefits, savings and property to get a full picture of your finances. The amount of care to be paid is then based upon the your position in relation to the Upper and Lower Capital Limits:
Upper Capital Limit (UCL) = £23,250
Lower Capital Limit (LCL) = £14,250
Thresholds from October 2023:
Upper Capital Limit (UCL) = £100,000
Lower Capital Limit (LCL) = £20,000
- Above the UCL – you will self fund all of your care
- Between the LCL and UCL – this will be means tested and will be based upon what is affordable from your income. If you also have capital (i.e cash or ISA savings), you will be expected to contribute £1 per week for every £250 of capital held
- Below the LCL – you no longer contribute from your assets and only pay what you can afford from your income. The balance is funded by the Local Authority
Is my home always included in the Means Test?
If you move permanently into a care home, your share of your Main Residence could be included in your financial assessment and used to fund care after the first 12 weeks. If your home is included, you can choose to make a deferred payment meaning that the council lends you the money and the debt is repaid when you eventually sell your home.
However, your home won’t count as capital if specific people still live there. They include:
- Your spouse
- A close relative who is 60 or over
- A close relative under the age of 16 who you’re legally responsible for
I’ve heard there have been changes to care legislation – how does this affect me?
The government has recently announced that from October 2023, no one will have to pay more than £86,000 in care costs during their lifetime. This is part-funded by the 1.25% increase to National Insurance and dividend tax from April 2022.
On the surface, this sounds great, but it’s important to delve into finer detail here….
- The cap is only relevant for ‘Personal Care Costs’. This does not include Daily Living Costs (i.e. rent, food and bills), so the total amount paid once an individual starts care could be substantially higher than £86,000.
- Daily Living Costs will be set nationally at £200 per week which will apply to anyone that receives care in a care home. This is a total annual cost of £10,400 which does not count towards the cap.
- Costs accrued before October 2023 will not count towards the cap.
- If you wish to choose a specific type of accommodation/room (i.e. a premium room or extra furnishings), there will be additional ‘top up’ payments required.
- The Upper Capital Limit has increased, so individuals are able to have more assets before they must pay for their care in full
- Any nursing and assistance required in your own home will count towards the care cap
For example, if you had assets worth £500,000 you would be expected to fully fund your own care. If you are in residential care for 4 years and the explicit care costs were £30,000pa, you would stop paying for the cost of care in your third year, once you reach the £86,000 cap. However, the Daily Living Costs of £10,400 per annum would continue and you would pay an additional £41,600 over the 4 years.
How can financial planning help me prepare for this?
At boosst, we can help you better understand what care might cost and how you will be able to fund this. Our ‘the full boosst’ clients can add the cost of care into a scenario within cashflow projections to better understand the impact in later life. This can be hugely helpful, as it can show you whether you could afford to be in residential care for a number of years, and whether any changes would be needed to fund this (i.e. selling a property).
Please note that we do not include care costs in your main ‘Current Position’ projections, as including an accurate cost/duration/location is impossible. It’s also perfectly okay not to include care in your planning whatsoever. Not everyone will need to go into a care home and many clients are happy knowing that the equity in their Main Residence can be accessed to fund care if required.
boosst final takeaways…
- The new care cap is beneficial for those that spend a longer period of time in care, as they are more likely to reach the cap and benefit from a reduced cost of care thereafter.
- The £200 per week Daily Living Cost should be seen as the minimum. If you would like a nicer room and better furnishings, then ‘top up’ payments will be required, which can dramatically impact the amount paid.
- The increase to the Upper Capital Limit to £100,000 is unlikely to benefit many individuals that own their own home, especially those in London or the South East due to property prices being higher.
Early planning is the best way to prepare for future care costs. If you would like to discuss the impact of care upon your financial planning, please reach out to your lead planner.