We understand how difficult and confusing it can be, planning how to finance care fees, particularly at a time when you are dealing with decisions concerning the care needs of a loved one.
At Water Mill House we work with Eldercare Solutions Limited, who are regulated, independent care fees planning specialists. Their advisers are Later Life Accredited through the Society of Later Life Advisers (SOLLA) and are able to provide independent advice on what the options are for funding long-term care.
Nicky Cave, Managing Director of Eldercare Solutions answers some frequently asked questions
Currently, if the person needing care has capital in excess of £23,250, they will generally be responsible for funding their own care until the time their money falls below this threshold. If they require a certain level of nursing care, a contribution or even all of the cost of care could be funded by the NHS (not means tested).
As a ‘self-funder’ they would still be able to receive, or make a claim for, Attendance Allowance, which is a non-means-tested, tax-free State Benefit. Details of the amount and the telephone number to make a claim are in Eldercare Solution’s Paying for Care Guide which you can download here.
With good planning it may be possible, when care is needed, to structure finances in such a way that care fees can be paid for the rest of your relative/friend’s life, providing peace of mind.
No, not necessarily. If they have funds of less than £23,250 in England then, following on from a 12-week disregard, you can ask their local authority for a deferred payment agreement. They should agree to lend them the difference between their existing income, including any rental income from the property, and the cost of their chosen care home. The money is then repaid to the local authority out of your loved one’s estate after their death. In the event of them living in care for several years, however, the debt could end up offsetting most of the equity in the property. Income tax would be due on any rental income and capital gains tax may be due once they have lived in the care home for three years. The local authority will charge a set up fee and will charge interest on the debt.
Yes, of course. If they have a significant amount of capital, then investing it wisely may produce the income they need to meet the ‘shortfall’ between their care home fees and their pension(s) and Attendance Allowance. However, in the current economic climate, this is becoming a much less viable option unless they are prepared to invest in higher risk funds. An investment of say £250,000 would generate just £7,500 per year of income assuming it were possible to secure a 3% net rate of return. The money could therefore still run out if they live in care for several years.
This is a type of insurance specifically for people paying privately for their care home place but who want to ‘cap’ those care costs in the event of longevity. They are bespoke, taking into account someone’s age and specific state of health. It, therefore, offers much higher rates of income than a standard pension annuity. The plan is purchased with a one-off lump sum (usually from a property sale or savings) which is non-refundable if death occurs more than six months after buying the plan unless extra ‘capital protection’ is also paid for. Alternatively, you can set the plan up with a ‘deferred start date’ which makes it much cheaper to buy but gives the same protection in the event of longevity. The Financial Services Compensation Scheme covers these types of plans, guaranteeing 100% of the income that you buy with no maximum cut-off point.
The income from the plan is paid, tax-free, to the care home for the rest of your loved one’s life. Any money spent on the plan will immediately reduce their estate for the purpose of Inheritance Tax.
If you are able to tell us your relative/friend’s age and how much income they would require from such a plan (usually this would be their care home fees less any existing guaranteed income that they already receive) we would be able to give you an idea of the likely cost of a plan so a decision can be made whether it is worth researching further and of course answer any other questions that you may have. There is no cost or obligation if you instruct us to obtain fully underwritten quotes for you and, as at November 2019, we are the only firm in the UK with access to quotes from four insurance companies.
If you are taking out a care fees annuity to pay towards your relative/friend’s care fees then you can choose to have an income that stays the same or one that increases by a fixed percentage each year and, if they move care homes, the plan simply moves with them. Your adviser should be able to discuss the best way to structure things to allow for fee increases.
If an individual is paying their fees on a ‘pay as you go’ basis from their savings and/or investments then they should do some basic cashflow forecasting and perhaps speak with the care home about likely future fee increase rates so they are comfortable they can meet these increases.
If you have taken out a care fees annuity and made provision for future fee increases then this is a scenario that should never happen.
If you are funding the fees on a ‘pay as you go basis’ then, of course, it is possible that your funds might run out. You should speak with the care home about the options available if this were to happen.
If you have a care enquiry or a question about the fees themselves you can speak to Water Mill House’s Home Manager, Noelia – the home’s details can be found here.
For financial advice, you can contact the team at Eldercare Solutions on 0800 082 1155. You can also download a copy of their free Guide ‘Paying for Care – Important things you should know’ here.