We are all living longer. According to current research, 50% of babies born now could live to see the grand age of 100.
Unfortunately, longer life does not always mean longer independent living. More of us could need to fund long term care, for ourselves, parents or spouses.
Nursing care may be free under the NHS – but social care, the provision of homes for old people who are frail or no longer capable of looking after themselves is not, and the bills can be frightening. Even a local authority home can easily mean bills of £1,500 a month and the costs of private care can be much higher. Care fees usually increase annually, making planning ahead difficult when it is impossible to know how long someone will live.
The state makes a contribution, but anyone with assets over a certain level currently receives no local authority funding (which varies across the UK). If you are theoretically eligible to be fully funded by the council but want to choose a care home which charges more than the council’s “usual rate” you may have to make up the difference. These sometimes bear no relationship to local market prices so there may be no places in an area at the council’s usual rate. In these instances councils will ask for third party top-ups – which can be paid for by relatives or charities.
Some authorities may contribute to care fees through a secured loan and the NHS may assist with nursing care costs – but every year, thousands of people are forced to sell their homes to pay for their care.
This is set to change. The 2013 Budget set out plans for a cap on lifetime care fees and a higher permitted level of assets before requiring personal contribution. The national lifetime care costs cap will be £72,000 and the assets threshold £118,000, but these will not come in until 2016. Even when the limits are in place, it may be necessary for family to cover a shortfall.
Planning is difficult – but there are solutions available. One possible answer is a lump-sum purchase of an immediate care annuity to cover fees for the rest of their life. This can be costly, and the sooner you talk to your financial adviser about the possibilities the more affordable it may be.