How much do you think it costs to spend a year in a care home? Most of us assume it is less than £30,000, according to a survey by Partnership. Not so. The actual national average is around £36,000 rising to £50,000 in the south.
That’s pretty expensive when you consider that a year at top private school Eton costs around £30,000 and that a full year cruising round the world would set you back £50,000. And while most of us hope never to need to go into a home, “older people all too often have to make a major life decision at very short notice following a crisis, such as a bad fall or a stay in hospital”, says Stephen Lowe of Age Concern in The Daily Telegraph. So do some research, understand the process and how you can reduce the financial burden, before a crisis occurs.
If you have assets of more than £23,250 then you will have to fund your own care. And as your primary home is also included in the calculation of your assets, unless you have a spouse, partner, or relative over 60 living in it full time, this probably includes most of us.
Everyone is entitled to a care needs assessment from their local authority, so you might as well sign up for one. That way you’ll get to talk about what kind of care is available and how much you might one day need. Ask about funding too – and whether you have a hope of getting any.
When it comes to paying for care, you have three basic options. You can sell your home and use the money to pay for your care fees. Or you can pay the fees from investment income (and also rent out your home to help with costs). Or third, you can buy an immediate needs annuity. These work much like a standard annuity – you hand over a lump sum at the time of purchase in return for a fixed regular income.
The difference is that the money is paid not to you, but directly to your care provider. It is also paid tax free – so by going down this route you will have the security of knowing that the money you need will be paid until you die, as well as the satisfaction of having received an indirect subsidy from the state. And because the insurer knows they may not have to pay out for as long as they would under a standard annuity, rates (and hence the amount paid out) tend to be higher.
Finally, if you do end up in care, make sure you claim state benefits. Everyone over 65 who needs help caring for themselves can claim an attendance allowance. This is £47.80 or £71.40 tax-free a week depending on the level of care required. If you’re in a nursing home you should also claim the registered nursing care contribution of £108.70, paid directly to the home.