Covering the cost of care

With the inevitable passing of time, we must all face the possibility that one day we or a loved one may need additional support and care, either at home or in a care home. Residential and nursing care is not free for everyone – how much you may have to pay will depend on your individual circumstances. On this page we explain the different options for paying for care fees, including NHS and local authority funding and self-funding. 

How care funding works

There are three options for funding the costs of long-term care. You may be eligible for funding from the NHS or your local authority. Otherwise you will need to pay care fees with your own assets – known as self-funding.

NHS-funded nursing care

In some cases the NHS may fully fund your care. This is called NHS Continuing Healthcare. The NHS will carry out an assessment under national guidelines to decide whether you are eligible for support.

If you aren’t eligible for fully funded care, you may receive support if you need nursing care and you are in a care home that offers it. This is known as Funded Nursing Care (FNC) or the Registered Nursing Care Contribution (RNCC). The home will receive a weekly payment to cover care from a registered nurse.

Local authority funding

If you don’t qualify for NHS support, your local authority will assess your care needs and your ability to fund them. In England, the level of support you receive will depend on your level of capital:

• Below £14,250 – you will be entitled to the maximum funding for your care
• Between £14,250 and £23,250 – your local authority will assess your finances and care needs to determine how much support you are entitled to, and will also help with your first 12 weeks of care costs
• Over £23,250 – your local authority will not offer financial support, and you must fund your own care home fees

Needs assessment for local authority funding

Your local authority should carry out a care needs assessment to find out how much help and support you require. They will ask you questions about how much difficulty you have with everyday activities, such as washing and dressing, to create a care plan.

Assessing your capital for local authority funding

Local authorities will look at your overall financial situation to determine how much support you could receive. They will carry out a means test on your capital – such as savings, investments and property – and your regular income.

Your home

If you own your home then it could be included as an asset during your means test, unless any of the following are true:

• Your spouse, partner or civil partner still lives in the property
• A relative aged 60 or over lives in the property
• An incapacitated or disabled relative lives in the property
• A child of yours under age 18 lives in the property
• You are in the first 12 weeks of needing permanent care
• Your care is being provided on a temporary basis

For jointly owned property, the local authority will calculate its present sale value. The proceeds you would receive if you sold your part of the property would then be included when your capital is assessed.

You may also qualify for a deferred payment scheme. If most of your money is tied up in your home, your local authority will help to pay your fees and you can repay them when your home is eventually sold.

How is income assessed?

Your local authority will also take into account your regular income, including any pension payments and benefits. Only your personal income is included – they will not look at income belonging to your spouse, partner or other family members.

What gets disregarded in a means test?

Your local authority will disregard a number of other assets or income sources when calculating your capital. Some of these include:

• Personal possessions
• Disability Living Allowance
• Interest from savings
• War Widows’ special payments
• Child Tax Credit
• Guardian’s Allowance
• Charitable payments

Self-funding for care fees

If you aren’t eligible for NHS or local authority care home funding, you will need to pay the fees for yourself. This is called self-funding. The average care home fees for self-funders currently stand at around £1,000 per week but this doesn’t take into account the additional specialist care that those with dementia may need*. You have several different options for paying these fees – you can use personal capital, income or a combination of both.

Using your income

You can pay for your care home fees using income from a number of different sources, including:

• Pension income
• An annuity
• Rental properties
• Investments

Using your capital

Another option is to draw on your personal assets to pay for your care home fees. These could include:

• Savings such as ISAs, National Savings Certificates or Savings Bonds
• Shares and other investments
• Property (if your home is your only capital asset and you don’t have enough income to fund the care fees, you should contact your local authority to discuss deferred payment/ home loan arrangements until the property is sold)
• Long-term care annuities and certain equity release schemes specifically designed for self-funded care

Long-term care annuities

Long-term care annuities pay out a regular income in exchange for a one-off lump sum payment. The average cost of a long-term care annuity is around £105,000**, but the exact amount will depend on your health, age and amount of income needed. Only specialists can provide advice on long-term care annuities, and they can only be purchased through an adviser, so it pays to speak to an expert if you would like the security of a fixed income for life.

Do you have enough money to pay for care?

24% of people who self-fund their care home fees run out of money and fall back on State support***. If you are planning to pay for your own care home fees, it is important to speak to an expert to make sure you have enough money.

What happens if you run out of money?

If you no longer have enough money to fund your care, you will need to be reassessed by your local authority. If your capital drops below £23,250 you may start to receive State funding. It can take time for new funding arrangements to be set up, so you should contact your local authority if your assets dip below £30,000 to ensure a smooth transition from self-funding to local authority funding.