Paying for long-term care
First published on 12 of October 2017 • Updated 30 of April 2019
Anyone may need long-term care at any age, but it’s most often necessary in later life. If you or a family member require this kind of support – or just want to plan ahead for the eventuality – then you will want to know what kind of care is most appropriate, and also how to pay for it.
What is long term care?
‘Care’ is a very broad term. It can mean support in everyday tasks which an able-bodied person could reasonably be expected to do for themselves (i.e. non-medical care), or medical services to treat ongoing conditions, including the general effects of old age. Care can mean anything from a home help visiting a few times per week, to receiving 24-hour care in a residential home.
What kind of care do I need?
Whether you are looking for care for a family member or for yourself, the first step is finding out exactly what services are available. Contact your local adult social services department, and your local authority will be able to carry out a full assessment of your needs, called a means test.
This means test will also determine what support (if any) will be available via your local authority, and how much you may have to fund for yourself. Even if you do qualify for some support, you may decide to pay for a higher level of care.
How much does care cost?
The exact cost of your care will depend on various things, such as the type of care you receive, how many hours per week you need it, where in the UK you live, and your care provider. Here is a broad summary of the costs you can expect for different kinds of care.
Care in your own home
Care at home usually costs between £10 and £30 per hour, depending on the provider and when you need them (e.g. night times and weekends may be more expensive). The average hourly rate is around £15, so for three hours of care every day you could expect to pay just over £16,000 per year.
A residential care home
The average cost of a residential care home in the UK is around £32,000 per year. However, this can vary significantly depending on where you live. Some care homes in the North West may charge as little as £27,000 while those in London and the South West can charge nearly £40,000.
A nursing home
Nursing homes are generally more expensive (£43,000 per year on average) but like care homes their fees vary by region. The cheapest may be found in the North East (around £35,000 per year) while the most costly are in the South East (over £54,000).
Ways to pay for long-term care
Ways to pay for care may include:
- Pension income
- Savings and investments
- An immediate care plan
- Your home
Care is usually expensive, and in the case of full-time care it is often very expensive. If you struggle to see how you could meet this challenge, your first port of call should be an independent financial adviser who specialises in long-term care. Remember too that funding arrangements may take time to put in place, so the sooner contact a specialist, the better.
Your options for funding long-term care may come from one or more of the following.
Pension income, savings and other assets
Your private income (e.g. from pensions, the State Pension and any savings or investments you may have) can cover at least some of your care, but if your care needs are significant you will probably need other solutions too.
Immediate care plan
This is sometimes called an immediate needs annuity, and like an annuity this product is set up in exchange for a lump sum. It’s designed to pay the shortfall between your income and your care costs for the rest of your life, and pays directly to the care provider. Some immediate needs annuities may increase their payments automatically to keep pace with care costs.
Your financial adviser can go over all the options with you to find the best solutions. Being long-term care specialists, they should also be able to offer practical recommendations on the types of care available, and even on individual care providers. Importantly, they can also show you that long-term care can be affordable, and need not impose a burden on your family.
Long term care insurance
Currently there are no mainstream insurance products for covering long term care. The closest thing to long term care insurance is the immediate care plan or immediate needs annuity (see above), which can be set up to rise with costs and/or inflation.
Another option is to use any remaining pension pot that you may still have left to buy an enhanced annuity. An enhanced annuity takes into account any health conditions you may have, to give you a potentially higher income. Ask your financial adviser about this.
What if I can’t manage my own finances?
Conditions like dementia, or simply the effects of old age, can make it hard or impossible for a person to manage their own finances. This can happen to anyone, so it is highly advisable to set up Lasting Power of Attorney while you are fully competent. In doing this, you choose a person or persons (usually family members) who can do this on your behalf during your life. Talk to a solicitor about setting this up – it’s never too soon to arrange it, and it can be just as vital as making a will.
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