Loose Women panel discuss the price of care homes
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Elderly social care is costly and figuring out how to fund it can be a worrisome topic for many households. The social care scene can be complex at the best of times, however, while uncertainty stirs around policies as prime ministers change hands, people may be more unsure than ever about just what options are available to help with costs.
In the run-up to being voted the UK’s new Prime Minister, Liz Truss said she will look to scrapping the health and care levy to increase funding for social care overall through taxation elsewhere.
The country still awaits confirmation of her plans and while many people think the only option is to self-fund care, Lee Harris, director of financial planning at Evelyn Partners said “there are in fact other choices available”.
Mr Harris addressed the most pressing questions families are facing over the possible costs of care and how to fund it.
Can people get help to cover the cost of care?
There are a few ways people can get help to cover care costs.
Mr Harris said: “For those who are likely to need care soon or are already at the point of needing care, the first step is to contact their local authority.
“Every local authority is duty-bound to carry out a care needs assessment on request. They consider what benefits people are entitled to and look at exactly what care options are available.
“In many cases, this does not mean going into a care home. Often, someone can receive adequate care in the comfort of their own home quite easily.”
The level of support provided by local authorities to those who are eligible depends on how much capital they have and where they’re based.
As of the 2022-23 tax year, in England and Northern Ireland, people can receive full funding for their care from local authorities if they have savings of less than £14,250.
Full funding is provided for those in Scotland if they have £18,500 or less, while those in Wales need to have less than £24,000 to receive full payment of care in their own home or £50,000 if they receive care in a care home.
Those who have accumulated any capital above that threshold can receive partial support or may have to entirely self-fund depending on the figure. Full threshold details can be found here.
Mr Harris added: “In some cases, the NHS will cover the full costs of care – known as NHS Continuing Healthcare – they will carry out an assessment for suitability.
“It is important to bear in mind that the NHS do decline many applications to cover care costs in the first instance, but some appeals are successful.”
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What other options are available?
There are many different self-funding options available for those able, including drawing on savings and investments, purchasing a care annuity or setting up a deferred payment agreement.
A care annuity can be an effective way of funding care for life while preserving capital, according to Mr Harris.
He said: “Similar to pension annuities, long-term care annuities are purchased for a set lump sum and then pay out a regular income to cover ongoing care costs.
“A care annuity is purchased at the point of needing care. If a power of attorney is in place, the attorney can purchase a care annuity on behalf of the person who needs care. The key benefits of a care annuity are that they can cover the cost of care for life and if the payments are made directly to the care provider, they are tax-free.”
Although it’s easy to source a quote for a care annuity, it can only be purchased through a suitably qualified financial planner.
Mr Harris continued: “They assess the benefits of putting this type of plan into place as they are not suitable for everyone. There are many different types of care annuities available and a financial planner can help to establish which is the right one.”
Deferred payment agreements
If someone needing care in a care home wishes to retain their home but needs additional capital to fund their care costs, they could apply for a deferred payment agreement.
Mr Harris said: “This offsets the cost of care as a charge against their property, usually up to a maximum loan-to-value of around 70 percent.
“On the death of the person receiving care, if the beneficiaries wish to sell the property, they can and the cost of care levied against the property can then be paid off from the sale proceeds. If the beneficiaries wish to keep the home, the executors of the Will can settle the outstanding charge personally.
“The main benefit of a deferred payment agreement is that the property can be rented out and the rental income can be used to pay towards the cost of care (if necessary), and the property can continue to grow in value instead of being sold.”
What is the social care cap?
The social care cap is an upper limit on the amount of money any individual will be asked to pay towards their social care costs, and the Government are proposing to introduce this cap – of £86,000 – from October 2023.
Mr Harris said: “The £86,000 limit only applies to ‘eligible needs’ as determined by the local authority in question.
“It does not include additional care costs or accommodation costs. Any payments towards care made between now and October 2023 will not count towards the cap. Therefore, it could take a long time to reach the cap.
“Even when it is met, you will still be liable for other costs going forward (subject to thresholds).”
There are also proposed changes to the thresholds for local authority support from October 2023.
The lower limit will increase from £14,250 to £20,000 and the upper savings threshold will rise from £23,250 to £100,000.
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