It’s always a sad time when you realise that you or a loved one needs to go into care. And then there’s the thorny issue of cost…
How are care homes financed?
In the UK, care is financed partly through local authorities and partly through private finance – generally, that means those who can afford to pay. Some care homes operate on a purely private model, whereas other care homes might only accept local authority funding. Most, however, are a mix of both. It depends on the model the care home wishes to follow.
Local authority assistance
Local authorities will only pay the full amount if your loved one has less than £14,250 of assets, based on a formula that is detailed in our guide to moving into a care home. Typically, homeowners will have a lot more than that, but whether the home counts as an asset depends on who lives in it and their status. Those with a living partner will find that the home is protected while their partner is able to live in it, as are those with children under 16 and those with a disabled child regardless of age.
Joint accounts generally count for half, as does any private pension. However, moving assets so that they should be technically ignored by authorities is known as self-deprivation of assets, and councils are fairly wise to that. They can go back to recover the asset, even if the asset has technically changed hands.
If you don’t qualify for local authority assistance
Most people will not immediately qualify for local authority assistance, and as a result, they will need to dip into savings, rely on a loved one or sell their house. In some cases, pensions will cover the amount, which allows them to leave their house in their will. However, this depends on the cost of care, which varies depending on whether your loved one needs care or care with nursing. In addition, it varies significantly from area to area.
Average prices for care run from £26,500 to £38,500 per annum. If you have to add in the cost of nursing, it runs from £34,500 to £54,000. The average household earns approximately £36,604, with individual pensioners earning £16,998.59, according to the Office for National Statistics.
| Area | Weekly Income (Individuals) | Yearly Income (Individuals) | Weekly Income (Household) | Yearly Income (Household) |
| North East | £295 | £15,382 | £718 | £37,438 |
| North West | £312 | £16,268 | £633 | £33,006 |
| Yorkshire and the Humber | £309 | £16,112 | £620 | £32,328 |
| East Midlands | £326 | £16,998 | £640 | £33,371 |
| West Midlands | £292 | £15,225 | £626 | £32,641 |
| East of England | £341 | £17,780 | £755 | £39,367 |
| London | £384 | £20,022 | £749 | £39,055 |
| South East | £357 | £18,615 | £887 | £46,250 |
| South West | £317 | £16,529 | £711 | £37,073 |
| England | £330 | £17,207 | £716 | £37,334 |
| Wales | £297 | £15,486 | £567 | £29,565 |
| Scotland | £315 | £16,425 | £676 | £35,248 |
| Northern Ireland | £286 | £14,912 | £592 | £30,868 |
| United Kingdom | £326 | £16,998 | £702 | £36,604 |
As a result, very few people collecting a pension can afford to pay for nursing out of that pension. So what alternatives are there?
Private savings
Many people choose to pay for care from their private savings, and this can be a practical route. However, those savings can sometimes be better used if properly invested, so you may wish to talk to an independent financial adviser before committing funds to care.
If your savings run out, however, you will have to look at alternative means of paying, unless you do not own your own home. In which case, you may be then eligible for local authority care.
Do I need to sell my house?
Sometimes, you might have to sell your house, and this can be very hard. However, if you have major assets that put you over the threshold, but you do not have enough liquid money to pay for care, this can sometimes be the only option – especially if you live alone. However, you may wish to use a deferred payment agreement. This is an agreement with the local authority that they will pay your care home bills and will recoup the cost of your care from your home when you either sell it or pass on.
This is subject to certain conditions: you must have less than £23,250 of assets if you live in England, £24,000 if in Wales, and £26,250 in Scotland. These values exclude the value of your home.
What about home-based care?
Many people choose home-based care because it’s cheaper and it allows you to stay in your own home. It can also be increased as needed so that you get help only with the things that you need help with, and this could be for as little as a few hours a day. It’s often considered an intermediate stage, and it might be better for those who are just starting to struggle with day-to-day tasks.
There is also sheltered housing, which can be rented or bought, depending on your needs. This can be a good idea for those who have specific needs, and sheltered housing that is called “extra-care housing” is regulated by the Care Quality Commission. It provides options for living independently while still getting the care that is needed. Sheltered housing that is not extra-care housing, however, is not inspected. Always get a comprehensive breakdown of what services are included and what services are not included.
In general, if you are using sheltered housing, you will have to pay the rate for the property (typically as a leasehold) plus management fees. You may also have to pay an exit or transfer fee if you decide to leave the property or if you need a carer living with you. Sheltered housing is often fairly restrictive with regards to its lease, so it’s always worth getting a solicitor to go over it with you very carefully.
