Thanks to medical advances and healthier lifestyles, a growing number of us are enjoying longer lives.
Many of us in our fifties or sixties will have parents in their eighties and nineties who are still going strong, but in those later years of life, the chances are they may need help looking after themselves, whether in their own homes or in residential care. Research from public health journal The Lancet suggests that in the next 20 years, the number of people aged 85 and over who will need round-the-clock help with basic daily needs will nearly double.
Of course, as anyone who’s had to find long-term care for relatives will testify, fees don’t come cheap. People often have to make rushed and difficult decisions about a loved one’s care needs – and how to fund it. However, planning ahead and thinking about the various available options in advance could help you work out how to cover costs should your parents need care in later life, ensuring you’re prepared for when difficult and often emotional decisions need to be made.
- How much does long-term care cost?
- Financial help with care funding from your local authority
- Covering long-term care costs without funding
- If your parent or relative lives in Scotland
- If your parent or relative lives in Wales
- Other care funding options to consider
- Additional benefits they may be entitled to
How much does long-term care cost?
Fees for long-term residential care can be eye-watering, often exceeding £1,000 a week. According to the Office for National Statistics’ inflation tool, nursing homes now cost an average of £1,176 per week, or £61,252 a year, almost twice as much as the average salary before tax and up 10% from last year.
The costs of care will vary depending on where you live, with London residents and those living in the south typically having to pay much more than those living in the rest of England.
Specialist care, such as for people with dementia or other neurological or physical conditions, will also tend to cost considerably more.
Funding for care is means-tested by local authorities and could be the biggest cost your parents or other relatives face in retirement if they’re not eligible for local authority or NHS funding.
Eligibility will largely depend on their health and mobility combined with the value of their savings, assets and income. For some, there will be nothing to pay, others will have to foot the entire bill, while a large number of people will fall somewhere in the middle.
Financial help with care funding from your local authority
Your local council may be able to help your relative with the costs of a care home or, if they prefer to remain at home, with paying for carers, equipment and specialist services.
If they live in England or Northern Ireland, the amount of funding that they will receive varies, and will be determined by a number of factors including:
- What their individual needs are (based on a care needs assessment)
- How much they can afford to pay towards care costs themselves (they’ll be assessed financially through a means test)
If your parent or relative has a serious medical condition or a long-term disability, they may qualify for Continuing Healthcare (CHC).
This is provided free of charge by the NHS and care is available either at home, or in a hospital, nursing home or hospice. Unlike local authority funding, NHS Continuing Healthcare is not means-tested, but there are many reports of it being difficult to qualify for as eligibility requirements are open to interpretation.
A person is more likely to qualify for Continuing Healthcare if they have mostly healthcare needs rather than social care needs, or in other words, if they need medical support rather than a carer. To determine whether a parent or relative might be eligible for Continuing Healthcare, a health or social care professional will use a checklist covering areas of care such as cognition, mobility and continence. If their needs are considered high in a number of these areas, they will then undergo a full assessment. Following this assessment, they’ll be notified whether or not they qualify. Unfortunately simply having a diagnosis of a particular condition such as dementia, doesn’t mean your parent or relative will automatically qualify for NHS Continuing Healthcare funding. It will need to be proved by the assessment that they have a ‘primary health need’ before funding will be granted.
You can find out if a parent or relative may be eligible for NHS Continuing Healthcare funding here. If you have any questions or need further information, the NHS recommends speaking to an organisation called the Beacon, which gives free independent advice on NHS Continuing Healthcare. Visit Beaconchc.co.uk or call the free helpline on 0345 548 0300. You can find out more about NHS Continuing Healthcare in our guide NHS Continuing Healthcare: can you get care fees covered?
If they aren’t eligible for Continuing Healthcare funding, and live in England or Northern Ireland, they might be able to get the local council to pay towards the cost of their care, but they will need to be means tested to make sure they are eligible.
Means-testing for help with care
Before the local council will pay anything towards the cost of your parent or relative’s care, they will conduct a care needs assessment to outline exactly what care is needed. If the assessment agrees that care is needed, the local council will then carry out a financial assessment, or means test, to look at whether your parent or relative has the money to support their own care needs. Broadly speaking, to be eligible for help paying for care, your parent or relative will need to have less than £23,250 in savings, including any income, benefits or pension.
If they have between £14,250 and £23,250 in savings, then they’ll qualify for some support, but if they have less than £14,250, their local authority may cover the full cost of care.
If a parent or relative lives on their own and then goes into residential care permanently, their local authority may also factor in the value of their home when assessing how much they can afford to pay towards their care costs. However, they can’t include the value of their property in their financial assessment for the first 12 weeks after they move into care, so they have time to think about their options. If their partner or spouse is still living in the property, the value of the property will be disregarded. You can read more about financial assessments for social care on NHS.uk.
Rules were due to change this year, so that if your assets are less than £20,000, from October 2023, you wouldn’t have to make any contribution toward care costs from your savings or the value of your home. Anyone with assets of between £20,000 and £100,000 would have been eligible for some means-tested support. However, these changes have now been postponed until October 2025, two years later than expected.
A new cap will be introduced from 2025 too, so that the maximum you’ll have to pay for personal care if you’re starting adult social care is £86,000 over your lifetime.
The information shown here relates to rules as they stand at the moment.
Covering long-term care costs without funding
Depending on their circumstances, your parent or relative might not qualify for any funding from the NHS or their local authority.
Even if they do, the amount they receive might not be enough to completely cover their care costs either at home or in a care home, meaning they’ll have to make up any shortfall. As already mentioned, if their income and assets, including their home and any savings is above the £23,250 threshold, they’ll usually have to cover the full cost of care fees themselves.
For those fortunate enough to own their own home, a common way of funding long-term care is to think about selling their home, although this is not without risks and considerations. Properties can take time to sell, so it’s often not a quick solution. If your relative is eligible for any means-tested benefits, when their home is sold, this might affect their eligibility for these benefits.
If your parent has less than the £23,250 threshold in savings, with the remainder tied up in the value of their home, and they are unable to or don’t want to sell their property to cover care costs, it may be possible to opt for ‘deferred payments’ with their local authority.
What is a deferred payment arrangement?
A deferred payment essentially means that the council initially pays for care costs and this money is repaid when your parent or relative’s home is eventually sold. As a result, they won’t have to sell their home immediately to pay for care home fees. The local authority may charge interest on the deferred payments to cover costs, as it’s essentially a loan, but this rate is set by the government. In England, for example, thanks to the Care Act, the government-approved standard rate is linked to the market gilt rate which is published every six months, plus 0.15%.
Typically, when a property is factored into the means test, most local authorities will exclude 10% of its value to ensure that there is enough money available to cover selling costs and to make sure the local authority gets their money back if house prices fall.
However, the local authority can’t do this for the first 12 weeks after they’ve moved into care to give them time to think about the options available to them.
If your parent or relative lives in Scotland
Continuing Healthcare Funding is not available in Scotland, but your parent or relative may be eligible for NHS-funded Nursing Care. You’ll need to arrange a care needs assessment with their local council’s social care department. They will arrange for this to be carried out by either an NHS occupational therapist or a social worker.
If they are assessed as needing to move into residential care, they will only be eligible for help with care home fees if they have capital below an upper limit of £32,750.
Capital includes their property, Premium Bonds, investments and any money held in bank or building society accounts.
People residing in care homes who have capital above this higher capital limit are known as self-funders, and they won’t be entitled to any help with care fees from their local council, above any assessed entitlement to free personal and nursing care.
If their capital is between the upper £32,750 limit and a lower limit of £20,250, they will have to make a contribution towards the cost of their care at a rate of £1 for every £250 or part of £250 between these limits. This is known as ‘tariff income.’ For example, if their total capital is £23,750, this is equivalent to a weekly tariff income figure of £14 per week. This is worked out because their capital is £3,500 over the lower limit (of £20,250) which is then divided by £250 to give 14. This is multiplied by £1 to give £14.
If their capital is below the lower £20,250 limit, they should be eligible for publicly-funded care. Local councils set standard rates they’ll contribute towards these costs, which have yet to be agreed for 2023/24 but are temporarily:
- £855.78 a week for nursing care
- £739.43 a week for residential care
If the cost of the home is higher than this, you or another friend or relative will be expected to make up the difference.
If your parent or relative lives in Wales
If your parent or relative lives in Wales and needs to go into a care home, they will be required to pay for all their care home fees if their capital is £50,000 or above.
If their capital falls below this threshold, the local authority will pay for their care home fees, though their income may still be used to contribute.
However, they must still be left with an amount to pay for personal items, such as clothes. Currently, this minimum income amount is £33.99 a week.
The first step is to get them assessed to see exactly what their needs are. They can refer themselves for a local authority assessment of your care needs or, your or their GP can do this on their behalf.
You can find out more about funding long term care in Wales at Age UK or you can contact their helpline on 0300 303 44 98.
Other care funding options to consider
If your parent or relative isn’t eligible for help with long term care costs, don’t despair – there may be other ways for your parent to raise the cash they need.
Renting out their property
If they don’t want to sell their home, it may be possible to rent it out to provide an income which will cover their care costs. However, they must be prepared for the fact that there may be ‘void’ periods when they don’t have tenants and therefore there’s no rent coming in. There will also be maintenance costs to cover, as well as letting agent property management fees. Find out more about what’s involved in renting out a property in our guide What are my responsibilities as a landlord?
Equity release allows your parent or relative to unlock some of the wealth they may have tied up in their property, without having to sell their home. They can extract cash in a single lump sum or in smaller amounts over time through what’s known as drawdown.
Unlike a conventional mortgage, with equity release there are no monthly repayments to make – instead, interest rolls up and the loan plus interest is repaid when the property is eventually sold. It is not without risk however, and if eligible it may well be cheaper to take a loan from the local authority (by deferring payment) at a 2% rate of interest than using a private equity release scheme. If you would like to find out more, you can find out more about equity release in our guide Equity release: what is it and how does it work?
Taking money out of your home through equity release is a big financial decision so it is important to seek professional advice if you’re considering taking this route to cover long-term care costs.
If you’re ready to speak to someone, it’s essential to use an advisor who is trained in equity release and who can recommend a suitable product from a member of the Equity Release Council (ERC) to ensure that a number of minimum product standards are met to help safeguard borrowers.
If you’re looking for somewhere to start, you can get expert advice from a Rest Less Mortgages equity release specialist. They are active members of the ERC and can advise on equity release mortgages from the whole of the market. They’ll listen to your needs and talk you through your options, so you can decide if equity release is the right option for you.
Another option they may want to consider is downsizing their property. While they’re unlikely to raise as much cash as they would through selling their property outright, it can be more cost-effective than equity release as they won’t rack up any interest charges, and will enable them to keep a foothold on the property market that they could still leave to family or friends when they die.
If they plan to receive care in their own home, rather than a care home, then a smaller home may also be more manageable and could help them to reduce their household bills and running costs.
Our article Five questions to ask yourself if you’re considering downsizing your home might help you decide whether downsizing is the right option or not.
Using a pension to pay for care costs
If your parent or relative has built up significant retirement savings over time, they may decide to put some or all of the income from their pension towards their long term care costs.
The local council will treat your parent’s pension as an asset and include it when working out what they can afford to pay towards their care.
Additional benefits they may be entitled to
Even if they have to pay for care costs themselves, your loved ones may still be eligible to claim some benefits which could help with the cost.
Certain benefits aren’t means-tested, so they may qualify for them if their health needs are great enough regardless of any income or savings. These include:
- Attendance Allowance
- Disability Living Allowance
- Personal Independence Payment (which is replacing Disability Living Allowance)
There are also other benefits that they may be eligible for depending on their circumstances. The rules surrounding entitlement to benefits can be extremely complicated, so seek advice if you’re not sure whether your parent or relative is eligible for support.
Charity Turn2us, for example, can assess your eligibility for benefits through its Turn2us benefits calculator or if you’d rather speak to someone, you can contact them by phone on 0808 802 2000. The site Entitledto.co.uk also has a free benefits calculator which you can use to work out whether your parent or relative qualifies for financial support.
Alternatively, you can get help from Citizens Advice. You can search for your local Citizens Advice here or you can telephone their customer service helpline on 0344 411 1444.
Working out how to fund long-term care can be complicated, so it’s worth your parent or other relative seeking professional financial advice if they’re not sure how to proceed. They, or you, can find a local financial advisor on VouchedFor or Unbiased, or for more information, check out our guide on How to find the right financial advisor for you.
If you’re considering getting professional financial advice, Aviva is offering Rest Less members a free initial consultation with an expert to chat about your financial situation and goals. There’s no obligation, but if they feel you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.
It may also be worth contacting the Society of Later Life Advisers, a not-for-profit organisation dedicated to improving accessibility to regulated financial advice for older people and their families.