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 you want to be prepared just in case, 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 with everyday tasks that an able-bodied person could reasonably be expected to do for themselves or medical services to treat ongoing conditions, including the general effects of old age.
Care can mean anything from someone visiting a few times a week to offer assistance 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 yourself, the first step is finding out exactly what services are available.
Contact your local adult social services department. Your local authority will be able to carry out a full assessment of your needs, which is called a means test.
The 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 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 expected costs for different kinds of care.
Care in your own home
Care at home costs an average of £25 per hour, according to Age UK.
This can vary depending on the provider and when you need care, as night times and weekends may be more expensive.
A residential care home
The average cost of a residential care home in the UK is around £41,600 per year. However, this can vary significantly depending on where you live.
For example, some care homes in the North West may be cheaper, while those in London are likely to be more expensive.
A nursing home
Nursing homes are generally more expensive (£56,000 per year on average), but like care homes, their fees vary by region.
How to pay for long-term care
There are many ways to pay for care, including:
- Using your pension income
- Savings and investments
- An immediate care plan
- Drawing on your capital
- Using the proceeds from selling your home
Care is usually costly, and full-time care is often very expensive.
If you struggle to see how you can meet this challenge, your first port of call should be your local council to ask if any care can be funded.
You could also consider talking to an independent financial adviser who specialises in long-term care.
Remember that funding arrangements may take time to put in place, so the sooner you act, the better.
Your options for funding long-term care may come from one or more of the below.
Pension income, savings and other assets
Your private income, such as from your pensions, the state pension and any savings or investments you may have, may cover at least some of your care.
However, 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 care costs for the rest of your life and is paid directly to the care provider.
Some immediate needs annuities may increase their payments automatically to keep pace with care costs.
Drawing on capital
You could simply withdraw capital and pay for ongoing care costs from the wealth that you have accumulated, but tax can be an issue.
Your home
You could sell your home to pay for some of your care costs or release some value from it using equity release.
Alternatively, you could rent out all or part of it to boost your overall income.
Your financial adviser can review all the options with you to find the best solution. They should also be able to offer practical recommendations on the types of care available.
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, which can be set up to rise with costs and inflation.
Another option is to use any remaining pension pot you may still have left to buy an enhanced annuity.
An enhanced annuity considers any health conditions you may have to give you a potentially higher income. Ask a financial adviser about this.
What if I can’t manage my finances?
Conditions like dementia, or simply the effects of old age, can make it hard or impossible for a person to manage their finances.
This can happen to anyone, so it is advisable to set up a lasting power of attorney while you are fully competent.
In doing this, you choose a person or persons (usually family members) who can act on your behalf during your lifetime.
Talk to a solicitor about setting this up as it’s never too soon to arrange it, and it can be just as vital as making a will.
Plan for care now and ringfence your inheritance
Whatever option you choose, paying for later life care can undoubtedly strain your finances.
"Good financial planning means it is possible to plan for care without fully depleting assets and effectively ring-fence an inheritance for future generations," says chartered financial planner Martin Bamford.
"By drawing on cash savings, investing money for income or purchasing an immediate care annuity, it is possible to tailor a care funding strategy to suit individual needs.
"What does remain essential is seeking independent financial advice from a specialist care fees planner, who has knowledge and experience of this complex market.
"Planning effectively for the cost of long-term care can help avoid expensive mistakes and prevent wasting money or indeed running out of money too soon."
If you’re worried about funding your care or that of a family member, the most sensible first step is to seek professional advice.
Long-term care is a highly specialised area, so search for a financial adviser with the appropriate qualifications and experience via Unbiased.
