Don't get caught out by care costs

Long Term Care Costs

The costs of long term care can mount up unexpectedly, so it’s always a good idea to plan for them in advance. And it’s not just medical care costs, there are other factors and options you may want to consider, such as:

  • Adaptations for your home
  • Care home costs
  • At home care costs (for live in carers)

How to cover the costs

As well as the type of local authority funding you may already be aware of, there are other potential sources of funding you should investigate.

Many people with long term care needs, for example, don’t claim their full entitlement of benefits from the government – something that can add valuable extra cash to your pocket, and which you may be entitled to however much you might already have in assets.

Another potential source of funding is through the NHS, with their Continuing Healthcare scheme. This is another opportunity that most people remain unaware of, so it’s well worth trying to find out more in order to assist with your care costs.

We’ve put together some useful info that can help you when planning for the potential costs of long term care:

  • How much will you need? – some things to consider, cost-wise.
  • Local Authority funding – will you qualify? If so, for how much?
  • Benefits for people with long term care needs – possible state benefits available.
  • Self funding your long term care – using your own assets to pay for your care.
  • Long term care insurance – nowadays limited to a single annuity plan.
  • NHS Continuing Healthcare (CHC) – a little known potential source of funding.

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Long Term Care Costs - How much will you need?

Long term care can be an expensive business. How much will you need to continue living a good life, if you require long term care?

One of the main issues facing us when we consider the options for long term care is the amount of money we might need to fund the things we choose to do.

There’s no “one size fits all” approach that works here. For instance, you might want to retain complete independence, so may require substantial adaptations to be fitted within your home. (These could include such items as handrails, so you can get in and out of rooms easily, or refitting of your kitchen cupboards if you find it difficult to reach upwards to them, etc).

You may require a live in carer to help with your everyday activities, such as bathing and cooking. Costs here can start from £17+ per hour, so even just a couple of hours a day will work out at over £12,000 per year.

Or you might move into one of the many care homes that are likely to be available in your local area. Costs vary throughout the country, but you’re looking at a realistic minimum of at least £30,000 per year and considerably more if you live in one of the more expensive areas of the country, such as South East England.

There are several methods of gaining financial assistance to cover the costs of these things, including:

Local Authority funding – determined by your level of assets and requirements. (Includes a link to an online calculator that can help you see how much your local residential homes might charge for your long term care).

NHS continuing care – a little-known potential source of funding.

Benefits – another source of potential funding.

One thing we definitely recommend is that you think about the possibilities for your own long term care well in advance of it being required. We’re not suggesting that people in their 20s will necessarily be too concerned about things that won’t happen (they think) until well in the future.

But certainly you should be thinking about these issues if you are already living with a long term illness or disability, or you are approaching an age where physical and mental ailments might be looming ever nearer on the horizon.

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Local Authority Funding for Long Term Care Costs

We’re probably all aware that there is the possibility of receiving some long term care funding from the local council. And we might be aware that there’s a certain level of personal assets that we can have that trigger the funding from the authority if we’re below that level.

But what are the actual costs that might be covered by your local authority?

And will you have to pay for them yourself? Or will the council cover all or part of the fees?

Take a look at this Local Authority Care Costs Calculator – provided on the BBC website – to get more of an idea of what’s involved when it comes to your local authority helping to meet the costs of your long term care.

Once you’ve decided you want to get some help from your local authority, you’ll go through the process of a care needs assessment. This is a relatively simple process whereby your local council can determine what your needs and requirements are – specific to your individual circumstances - and how they can best help you with them.

Many people are put off approaching the local authority as they have visions of reams of forms to fill in and snooping council officials poking around their home trying to catch them out with awkward questions.

The reality, though, is that the care needs assessment will be based on trying to secure your well being, with your own interests and desires being at the centre of the process. The system has been carefully outlined in the 2014 Care Act, so your local authority has a clear set of guidelines it must follow during the assessment.

So you’ve got nothing to fear, and potentially quite a lot to gain, if the rules that are in place determine that your care costs will be met (at least in part) by the local authority.

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NHS Continuing Healthcare

You might qualify for financial assistance from the NHS to cover your long term care needs with Continuing Healthcare (CHC).

Continuing Healthcare provision through the NHS – also known as CHC – is something that isn’t as widely known about as it should be.

The funding comes from the NHS, rather than the local authority, and is based on an assessment of your needs. The overwhelming majority of issues that would be covered by CHC are medical ones. So you’re only likely to qualify for this type of funding if you have health-related problems, rather than what might be deemed “social problems” such as being generally infirm.

There are a range of health related problems that can entitle you to this continuing healthcare funding, though there is no strict definition guidelines that we can refer to. Some of the issues that may see you qualify include:

  • long term medical conditions
  • terminal illnesses
  • physical disabilities
  • mental disabilities
  • behavioural / cognitive impairment

The initial assessment will be organised by one of the local NHS Clinical Commissioning Groups. The process can be quite complicated, involving lots of different questions based on the assessment criteria. However, most of the people who qualify have stated that they believe it to be well worth the effort involved, based on the amount of funding they received.

How do I apply for NHS Continuing Healthcare funding?

In the first instance, you can start the process by requesting more information from your local GP, district nurse or social worker.

Your local council can also help start the assessment process.

You can have a loved one or a carer accompany you during the initial assessment.

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Long Term Care Costs - Can you claim Benefits?

There are several different types of benefit available from the government, that you might be able to claim if you have long term care needs, or if you’re a carer for someone with long term care needs.

One of the things you may not be aware of is that the amount you have to contribute towards the costs of your long term care, is calculated based on the fact that you are already claiming all the benefits you’re entitled to.

So if you’re not claiming these benefits, you will very likely end up losing out by having to contribute more towards your long term care costs than you necessarily should be doing.

People often recoil from the thought of claiming benefits, possibly having had bad experiences in the past with endless forms to fill in, interviews and delays and generally not having a good experience.

This is perfectly understandable, as the range of potential benefits available to people with care needs (and / or their carers) can appear to be quite bewildering when you first investigate the possibility.

For example, there are different names given to the various benefits including:

  • Personal Independence Payments
  • Disability Living Allowance
  • Attendance Allowance
  • Carer’s Allowance

and various other potential discounts for things like council tax.

Though it might appear complex and quite possibly not worth bothering with, we strongly recommend you look into claiming the benefits you could be entitled to, as soon as possible.

Many of these benefits are not means tested and some are paid out irrespective of the level of your personal assets. So there really is nothing to lose in finding out more.

Because there are so many different benefits and entitlements available, we recommend you contact your local Citizen’s Advice Bureau. They should be able to help you out by talking you through the various options so you understand what you should do next.

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Self Funding your Long Term Care

What can you do if you need (or want) to self fund your long term care? Selling your home isn’t the only option.

There are 2 main reasons you might end up self funding your long term care:

1) You can afford it and are happy to pay the necessary amount, either to cover the total costs or to put in some extra to receive a higher standard of care.

2) Your assets are such that you don’t qualify for all your costs to be covered by either local authority or NHS funding assistance. (Read more about these options on our local authority funding and NHS continuing healthcare pages).

Most people who are considering self funding will be in the second category, of people who don’t qualify for the full amount of their costs to be covered by outside funding. (Check out our advice on long term care benefits, too, though, as you may qualify for these even if you don’t think you will).

So what options do you have when looking into self funding your own care in the long term?

Selling Your Home

This is the one that people tend to be most fearful of. The thought of selling our home simply to pay for our own care is something that many of us don’t want to contemplate. After all, it’s the place we’ve chosen to live in, so why should we get rid of it just to end up somewhere we don’t want to be?

However, this option needn’t be quite as bad as you might first think. Plenty of people, as they get older and perhaps the children have fled the nest, consider downsizing their home to free up some cash for spending on other things.

Without the need for quite so many bedrooms, it can become a burden to have a larger home, so the possibility of selling up and moving to somewhere smaller can become increasingly attractive as the years go by.

Selling your home and moving somewhere smaller also gives you the opportunity to purchase a home that might be better suited to your long term care needs – for example, a bungalow with no stairs to climb, or perhaps a serviced flat in a retirement village that has help on hand when it might be required.

Equity Release

We’ve all seen the adverts for these schemes. And we may even have considered taking part in it, to free up some additional funds for holidays or other costly items, or simply to have more spare cash in our retirement.

So it can seem an attractive option to release some of the equity in our home if we need to self fund our long term care. (You can find out more about your equity release options).

Most advisers agree, however, that equity release should be down the list of options when it comes to sourcing the funds required. The main reason being that the amount of cash you’ll receive will almost certainly be considerably lower than the equivalent market rate for the share of the house you’re giving up.

Another major factor to consider when thinking about this option is that it only makes sense if you’re going to be staying in your home. So if your long term care needs are able to be met within your home, then it can be something you look into. Otherwise, there are probably no real benefits to be had from this method of funding your care if you’re likely to be moving into a residential care home – the reason being that your equity loan will have to be repaid once you move out, so you’d actually be gaining no advantage from the process.

Cashing in Savings / Realising Assets

You may already have a sufficient amount in your savings accounts to be able to cash them in and cover the future costs of your long term care. These savings could currently be in standard bank accounts, high interest accounts or ISAs.

Or you may own valuables that you can sell in order to build up a cash pile that you can put towards your care costs. These may be items of value, such as works of art or antique. Or they may be shares that you’ve built up over the years, or other items of value that you can exchange for cash, such as a car or holiday home.

Immediate Needs Annuity

This is currently the only type of long term care insurance that is available in the UK. You need to be medically assessed for immediate need, then you can use a lump sum to purchase an annuity that pays out every year, covering the costs of your ongoing care.

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Long Term Care Insurance

Is there a long term insurance plan that will help cover your long term care costs? 

If you’ve previously been concerned about the potential costs of your long term care, you may have taken out an insurance policy to help mitigate against this potential future expenditure.

Despite government encouragement to the industry to develop new insurance products for long term care, this type of pre-funded care plan is no longer available for sale through any insurer in the UK. (Though you may still have a pre-existing plan that you can take advantage of).

The only option currently available in the UK is based on your having an immediate need to fund your care. This type of scheme is known as an Immediate Needs Annuity.

An Immediate Needs Annuity is available to people who have been assessed as having an immediate medical need for long term care. You then purchase the annuity with a lump sum – possibly funded through the sale of your home – which then provides an annual income for the remainder of your life.

Not surprisingly, there are various rules and regulations that govern the purchase of an Immediate Needs Annuity, including the fact that they are generally only available to people over the age of 60, and that you are unable to reverse the policy if you decide it isn’t for you after the standard “cooling off” period.

It may also be that the amount you receive in your annuity payments are not sufficient to cover the total cost of your long term care. So we recommend you get independent financial advice regarding the possibility of taking out this form of long term care insurance.

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