Paying for Care for the Elderly

Published: August 2019 (2 Min Read)

One of the most stressful concerns for the elderly and their families is how to fund the cost of care in later life.

Weekly fees for a nursing home in England vary substantially according to location but are typically between £600 and £800 per week (yes, weekly!) (Source: https://www.ageuk.org.uk/information-advice/care/paying-for-care/paying-for-a-care-home/), and if specialist care is required the annual costs can easily be in excess of £100,000.

Many people prefer to remain at home for as long as they can. One of our clients pays nearly £70,000 a year to stay in her home, with a full-time carer, and that is before the usual day-to-day costs of running a household.

Either way it is an expensive episode in life, and it makes no allowance for the unpaid contributions of family and friends.

There are a number of ways that care costs can be mitigated by the State, such as NHS Continuing Care or Local Authority funding, but eligibility for these can be complicated and confusing. The NHS itself says “The process involved in NHS continuing healthcare assessments can be complex.” To emphasise the point they then mention “An organisation called Beacon gives free independent advice on NHS continuing healthcare.” (Source: https://www.nhs.uk/conditions/social-care-and-support-guide/money-work-and-benefits/nhs-continuing-healthcare/)

Local authority schemes rely on individuals having limited capital – less than £23,250 in England. (Source: https://www.nhs.uk/conditions/social-care-and-support-guide/money-work-and-benefits/when-the-council-might-pay-for-your-care/).

In practice a large majority of us will have to rely on self-funding for care and will have to draw upon the income or capital from our savings and investments.

There is a range of financial products which can help manage the situation, such as care annuities, long term insurance, or a deferred payment scheme. Some of these options can be expensive and are often complicated. Access to them may also depend upon how much capital you have. Advice from a specialist adviser is very important. Here are a few other alternatives that could be considered:

1. Rental Income can be a viable option if you are fortunate enough not to have to sell your home and can rent it out – ideal if you have a flat in London!
2. Equity Release, where you access part of the value of your home to fund care, is popular; but there are risks attached and it is expensive.
3. Using Savings has the advantage of being readily accessible and fee free; but utilising a long-term savings pot risks eroding (the real value) of your income over time as modest inflation outstrips meagre current interest rates.
4. Paying for care using a Pension income, such as flexible access, annuity purchase or income drawdown is an option, provided you have other assets to fund your retirement.
5. If you are able to use the Income from your Investments this can also be a great way to pay for care. Within reason an investment portfolio’s income can be adjusted to meet varying requirements, and potentially capital can be used as a top up when necessary. Of course, the investment pot needs to be of sufficient size, and the funds may come from or need to be supplemented by the sale of a house or pension drawdown. The risk is that, while long term income can be relatively predictable, capital values can fluctuate if markets are unstable. Volatility can be reduced to some extent by investing in low to medium risk investments. For example, GBIM’s Capital Preservation Portfolio strategy, which aims to provide a solid total return (income and capital) is designed to do just this.

Care in later life can be funded from one or a combination of any of the above, and more. Good planning is advisable and seeking sound investment advice essential.