Paying For Care

With care fees regularly costing anything between £850 to £2,200 p.w, paying for you own care can all to quickly consume most, if not all of your lifetime savings.

So if you need care what options are there?

The first thing you should do is to:

Ensure you would not qualify for NHS Continuing Healthcare – If you did and you live in England or Wales this could fund either all or at least most of the cost whether you need care at home, in a residential care home or a nursing home.  If you live in Scotland, you will only qualify for their equivalent “Hospital Based Complex Clinical Care” if you can only be care for in a hospital or NHS Hospice.  

Whether you may qualify is not based on wealth but need for care. You will only normally qualify if your need for care is primarily health/medical related rather than just needing help with activities of daily living such as washing feeding or toileting is required when whether you receive any help towards care fees will be means-tested.

If you or the person needing care has not already been assessed for NHS CHC either in any Hospital or by your Local Authority’s Social Services, you should request an assessment which can be carried out by a nurse, doctor, social worker or other qualified healthcare professional so speak to them  or contact your Local Integrated Care Board NHS Continuing Healthcare Co-ordinator whose address you can find by going on to https://www.nhs.uk/nhs-services/find-your-local-integrated-care-board.

Once you are sure you will not qualify for either NHS Continuous Funding or Local Authority funding, the options for funding care will depend on whether you need/want care at home or in a care home:

Options for Paying for Care at Home

• Paying from Income and/or Savings/Investments – Should you only need a few hours of care a day – you may simply be able to afford it from income or savings/investments.

If, however you need more extensive care, or simply want more hours of care than your Local Authority is willing to provide, providing you own your own home and you, and any other spouse or partner is at least 55, you could:

• Consider Releasing Equity From Your Home using a Lifetime Mortgage – A Lifetime Mortgage is a type of mortgage or loan secured on your home that will allow you to release either a single lump sum of money or alternatively create a credit facility that you can drawdown gradually. The amount you can borrow, or facility you could create, is not based on income but your (or where the property is jointly owned-the youngest owner’s) age and the value of your home.

Unlike a normal mortgage however, you would not be compelled to make any monthly repayments (unless you can/ would prefer to do), instead interest can be allowed to build up on the amount borrowed but then the debt will continue to increase until it is repaid from selling your property when you, or where the property is jointly owned, the last owner dies or moves into care.

The amount released could then be used to either buy an annuity or be drawdown overtime to fund your care for longer but depending on the amount of facility that could be set up, you could still exhaust this.

It is only available however where you, or at least any other joint owner, intends to remain living in the property, it is currently not possible to apply for a Lifetime Mortgage once you or the remaining owner has, or intends to move into care.

As the lender charges interest on the money they lend, should you choose not to repay the interest each month increasingly the debt will become larger and if married, or the property is jointly owned, it can also seriously impede the remaining owner’s options to move or to raise funds to possibly pay for their own care in the future.  You should therefore only consider releasing equity after obtaining specialist advice.

Equity Release will reduce the value of your estate and can affect your eligibility for means tested benefits.

• Buying an Immediate Needs Annuity – Should you have sufficient savings you could consider buying an immediate needs annuity to fund live in care as annuities can fund care either at home, or in a care home and if you subsequently move into care, any annuity purchased to fund care at home can be transferred and help to pay any care home fee.

Options for funding Care Home Fees.

Once it is decided care would be better provided in a care home and you do not qualify for either NHS Continuing Healthcare or Local Authority funding, and need to fund your own care, options for funding fees will include:

• Immediate Need Annuities
  These are very tax-efficient and because they provide an indefinite guaranteed income, they can provide you the reassurance that you should always be able to afford the care you want, rather than having to just depend on whatever care your Local Authority may be able or willing to provide. Not only this, but because you pay only one single premium, they help to protect any remaining money is preserved for beneficiaries. However, they are not the only option.

Other alternatives which should also be considered include:

• Paying from savings – In the short term this could preserve more money than buying an annuity, but should care turn out to be required for longer than thought, you stand the risk that your money could be totally exhausted, when you may be forced into moving homes.

• Asking your Local Authority for a Deferred Payments Scheme – providing your Local Authority assess that you need full time care in a care home and your assets EXCLUDING the value of your home, is less than £23,250 in England, £50,000 in Wales, or £22,000 if you live in Scotland (2025/6).

A Deferred Payment Arrangement is a type of loan or IOU that can be offered by your Local Authority and secured against the value of your home if you need care in a care home and the value of your other (non-property) assets is £23,250 or less if you live in England.

Under this scheme, whilst you remain responsible for paying for your own care rather than forcing you into having to quickly sell your home in order for you to pay for your care, the council agrees to pay your care home fees on your behalf until you eventually sell the property. To ensure they recover their money the secure a legal charge on your home and will charge a modest rate of interest.

To minimise the debt being built up as well as helping to reduce the money your Local Authority needs to fund, your Local Authority will you to pay most of your Pension income (apart from a small personal expenditure allowance of £30.65 p.w.  (England) £35.90 p.w. (Scotland)  £44.65 pw. (Wales) 2025-6, that you can keep) plus any state benefits you receive such as PIP or Attendance Allowance to your Local Authority.

As you will only need to repay however much debt has accumulated, a Deferred Payment Arrangement can be a good option if you feel care may only be required for a short period. If you wish, and your Local Authority agrees, you can even let your home to generate additional income to help minimise the debt being accumulated with the Local Authority

Your Local Authority will, however, only allow the debt to accumulate up to the point where the debt comes to approx. 80% of any valuation,  so you may still be forced into selling it and due to the interest being charged, if care continues for a long period, it could become more costly than buying an immediate needs annuity.

• Letting any remaining property – If single or widowed and no other dependant is living in your home, you could consider letting it. However, whilst this would produce additional income to help meet your care fees, in most cases any net income will not be sufficient to meet any shortfall you have in fees. Someone will also need to take on the responsibilities of being the landlord; accounting for any letting income to Inland Revenue, maintaining the property and should it be let for currently more than 3 years, any growth in your home’s value after being let could be liable to Capital Gains tax and under the new Renters Rights Act due to come into force in April 2026 you will not be able to evict tenants so easily.

• Family or Friends subsidizing your care fees. This would once again preserve much more money than buying an annuity at least in the short-term but will place a growing financial liability on younger family members and offers no peace of mind that they will always be able to continue to meet the fees.
• Investing any savings or money you have or will generate from selling your property. – This could potentially help fund your care for longer and preserve more money if care is only required for a short period. However, returns are unpredictable and potentially taxable. Most investments will offer any guaranteed escalation each year and the value of any investment can fall as well as rise.

Alternatively, if you have, or will have sufficient money after selling any home, you could consider buying an Immediate Needs Annuity.