Living with long term care needs

Covering the cost of your care depends on several unknowns

With the UK’s population ageing, more people will be living with long-term care needs. This means that as we approach old age, it becomes more likely that we may need day-to-day help with certain activities like washing and dressing, or assistance with household tasks, such as cleaning and cooking. This type of support, along with some types of medical assistance, is called long-term care.

Demand for long-term care is also expected to rise with the increasing prevalence of debilitating conditions such as dementia. Long-term care planning can get quite complicated, particularly when it comes to funding, as the cost depends on several unknowns, including how long we are going to live.

Providing financial support
Long-term care insurance provides the financial support you need if you have to pay for care assistance for yourself or a loved one. Long-term care insurance can cover the cost of assistance for those who need help to perform the basic activities of daily life, such as getting out of bed, dressing, washing and going to the toilet.

You can receive long-term care in your own home or in residential or nursing homes. Regardless of where you receive care, paying for care in old age is a growing issue.

Level of state support
Government state benefits can provide some help, but may not be enough or may not pay for the full cost of long-term care. The level of state support you receive can be different depending on whether you live in England, Wales, Scotland or Northern Ireland.

England
For the financial year 2020/21, if your total capital is:
less than £14,250: you’ll be entitled to maximum support from the local authority. You won’t have to contribute from your capital, but you may be expected to contribute from your income.
more than £14,250, but less than £23,250: you have to contribute towards the cost of your care – £1 for every £250 of savings between £14,250 and £23,250. This is known as ‘tariff income’.
more than £23,250: you’ll have to pay the full cost of your care. If you have less than £23,250 in capital, but a weekly income that is considered to be high enough to cover the cost of your care, you’ll have to pay all of your fees

For care at home, the value of your home is not included in the financial assessment. However, if you are being assessed for residential care in a care home or nursing home, the value of your home will count as part of your total capital.

If you’re a pensioner, any income contributions you make shouldn’t take your income below the level of the weekly Minimum Income Guarantee (MIG), which is £189 (2020/21). If you’re a member of a couple, your individual MIG is £144.30, or £288.60 if you both need care.

Some local authorities add 25% to the MIG and might also pay higher than the basic level, so it’s worth asking your local authority what their policy is to enable you to plan your cash flow.

Wales
If your total capital is:

less than £24,000: you’ll be entitled to maximum support from the local authority. You won’t have to contribute from your capital, but you will be expected to contribute from your income.
more than £24,000: the most you’ll have to pay in 2020/21 is £100 per week for your care at home

For care at home, the value of your home is not taken into consideration in the means test.

Scotland
In Scotland, personal care is free if you’re over 65 years of age and have been assessed by your local authority as needing it. This is regardless of personal circumstances – so no financial assessment is necessary. However, charges still apply to non-personal care services.

Northern Ireland
In Northern Ireland, home care is free if you have been assessed by your local authority as needing it. This is regardless of personal circumstances, so no financial assessment is necessary.

Types of long-term care plans
Immediate needs annuities – if you have care needs now, this type of plan pays a guaranteed income for life to help cover the cost of care fees in exchange for a one-off lump sum payment

Pre-funded care plans – gave you the option of insuring your future care needs before they develop (these plans are no longer available to purchase)

Other options
Enhanced annuities – you can use your pension to buy an enhanced annuity (also known as an ‘impaired life annuity’) if you have a health problem, a long-term illness, if you are overweight, or if you smoke. Annuity providers use full medical underwriting to get a more accurate individual price. People with medical conditions including Parkinson’s disease and multiple sclerosis, or those who have had a major organ transplant, are likely to be eligible for an enhanced annuity.

Equity release plans – give you the ability to get a cash lump sum as a loan secured on your home. This type of plan can be used if you are looking to fund a care plan now or in the near future.

Savings and investments – give you the opportunity to plan ahead and ensure your savings and assets are in place for your care needs.

If you are already retired, or nearing retirement, it makes good sense to take professional financial advice to ensure that your affairs are in order – for example, arranging your Will or a power of attorney. It also makes sense to ensure your savings, investments and other assets are in order in case you or your spouse or registered civil partner may need long-term care in the future.

When planning for your future care needs, think about: 
Who (in your family) most needs long- term care and for how long
Whether you need a care plan now
Whether you should be planning ahead for yourself or a loved one
Whether you have the money to pay for long-term care
How long you might need to pay for a care plan
Whether home care or a nursing home is required
What kinds of things would be required of the help – for example, help with dressing, using the toilet, feeding or mobility
Whether you find that your home requires additional features such as a stair lift, an opening and closing bath or a bath chair, and/or home help

Making decisions at what can be an emotional time
Life expectancy has increased, which in turn puts a greater strain on the standard of care that state support can provide. Many people don’t consider the issue of care at all, and it falls to their families to make long-term decisions (and often very expensive ones) at what can be an emotional time.

However, when an individual reaches the stage that they require long-term care, this does not necessarily mean that their life expectancy becomes reduced. The required care could last for 15 years or more, and therefore incurs considerable costs.