Paying for Long Term Care Costs

For many, we picture life in retirement as a long holiday – yet it is impossible to imagine the reality of old age until we get there, if we are lucky enough! We are all living longer, which can be a struggle if faced with illness or disability – and with that comes the worry of how you would pay for the cost of long-term care.

According to the Office of National Statistics (ONS)*, life expectancy at birth in 2018 to 2020 is 79.0 years for males and 82.9 years for females. Over the last 40 years life expectancy in the UK has been increasing, albeit at a slower pace in the last decade.

Assessment of Care and Finances

Social care isn’t free, so you will need to pay for some of your care depending on the level of need and the amount of assets you have. The first step is to arrange a free assessment of care through your local councils adult social services department. The care assessment will work out:
• What help you need
• What care is available
• How much you will have to pay for

There are generally two main care choices; care is provided either in your own home or a residential care home. The amount you will have to pay will depend on your savings, assets and income. If you have to go into a residential home, the value of your home may also be included. It is also important to recognise that if you are accepted for some government funding, your choice of care home may be limited.

Getting Independent Financial Advice

Planning ahead for long-term care can help you make fully informed decisions about the best way to pay for care. An Independent Financial Adviser can help you to work out which care option best suits your needs, how to fund your care and how much money you may need.

Obtaining good financial advice means you can:
• Have a greater choice of care-funding options that you might not have found yourself
• Make a fully informed decision about the best way to pay for care
• Ensure that your future care needs are provided for
• Get expert help to make the best use of your savings, income and assets, particularly if your own your own home.

Equity Release Plan

If you are a homeowner, there may be the option to release money secured on your property to help you pay for the costs of care. Also known as a lifetime mortgage, this is where you take a mortgage against part or all of your property but do not repay the loan until you die or go into long-term care and the house is sold. The lump sum can then be used to employ care attendants who will come to your home and provide personal care as required in your care plan. The interest can be fixed at the start and ‘rolls up’ (unpaid interest is added to the loan).

We would only recommend an Equity Release provider who is a member of the Equity Release Council, so there will automatically be a “no negative equity guarantee”. This means that when your property is sold, and agents’ and solicitors’ fees have been paid, even if the amount left is not enough to repay the outstanding loan to your provider, neither you nor your estate will be liable to pay any more. Some providers do offer the option to repay some or all of the interest.

The minimum age at which you can take out a lifetime mortgage is usually 55, however the earlier you take a lifetime mortgage, the more it is likely to cost in the long run.

Buy a care fees annuity

If you are permanently going into residential care, it is possible to buy a specialist annuity that will guarantee an income to help fund care costs for the remainder of your life. This can bring peace of mind for you and your family as an annuity income is usually fixed, providing a tax-free regular income to your care provider.

Protecting your wealth no matter what later life throws at you may seem intimidating, however there is plenty of advice and help available.

If you would like to speak to an Independent Financial Adviser at Eastern Financial Consultants, you can contact us via email advice@efcadvice.co.uk or call 01603 927760 to arrange an initial consultation to discuss your requirements.

*Source: Office of National Statistics 16/8/2023