I am sure like me, you are well aware that with life expectancy increasing in the UK the prospect of needing long term care, and long term care insurance, is something that more and more people are likely to face. Unfortunately, despite making contributions to National Insurance, it is still possible that you will have to contribute towards your long term care costs. This applies whether you receive care at your own home or in a care home. The amount you pay will depend on our income, savings and other capital.

According to an article in the Daily Telegraph in February this year, around 135,000 individuals are admitted into care each year, usually as a result of an accident or other health crisis. Government figures state that over the next 12 months, 62,000 families will have to pay anywhere between £35,000 and £40,000 in care fees. This is because the individual entering into care has savings and property over the means testing threshold (£25,250 in Scotland) and therefore will receive no support from the State.

These are quite shocking figures and finding the money to pay these bills can be quite traumatic for families and results in over 35,000 emergency property sales a year, according to the Department of Health.

Deferred Payment Agreements

If you do not have enough money to meet the full cost of your care fees and have savings or capital under the current threshold of £25,250 in Scotland (£23,250 in England and Northern Ireland, £23,750 in Wales), (excluding the value of your home) a deferred payment agreement may be considered by the Department of Health and Community Services or local authority (Health and Social Care Trust in Northern Ireland). In essence a ‘Deferred Payment Agreement’ means that you are not forced to sell your home if you need to move into a care home.

How it works:

  • You pay what you can towards your care fees, which is based on an assessment of your income. HCS will also make contributions until your death or until your property is sold.
  • The local authority will need to place a legal charge on your property which you will have to agree to. This will enable them to recover the costs they have paid towards your care when your property is sold.
  • You have the option to rent your property out and use the rental income to pay towards your care fees, which will also reduce the amount you have to repay HCS.
  • When HCS claim back the fees they covered for you whilst you were in care, they will also expect you or your estate to cover the legal and land registration fees associated with the sales of the property.
  • If you are allowed expenses to maintain your property, these would be added to the final sum that you owe.
  • Interest is only charged either 56 days after your death or when you end the agreement.

Note that from April 2015 a national ‘universal deferred payments scheme’, was introduced as part of the Government’s reform of the way that care is paid for. More information can be found at http://careandsupportregs.dh.gov.uk/category/deferred-payments.

Disposing of assets to avoid paying for care fees

Deliberately transferring assets to someone else, such as a family member, to fall below the threshold and avoid paying the full cost of your care is called ‘deprivation of assets’. It should be noted that this doesn’t necessarily mean that those assets will not be taken into account when you are means tested. So if this is something you or a family member is considering, please seek advice from us first. We are happy to work with you to find the best solution for your needs.

How do you know when you need long term care?

If you are wondering whether or not you or a family member may need long term care you should consider:

  • If you should be planning ahead
  • Whether you have the money to pay for long term care or if you will need to look at other solutions
  • How long you might need to pay for a care and whether you would prefer or need home care or to go into a nursing home
  • What level of help you will need, such as for; walking, feeding dressing, using the bathroom etc.
  • If you require additional support at home, such as a hospital bed, a stair lift, specialist bath etc.

Long term care insurance solutions

There are different types of solutions that provide an alternative way of obtaining the financial support you may need if you have to pay long term care fees for yourself or a loved one, whether in your own home or in residential or nursing homes.

Long Term Care Insurance

This type of insurance provides assistance for those who need help performing the basic activities of daily life such as getting out of bed, dressing, washing and using the toilet.  Some reasons for taking out long term care insurance include; having dementia such as Alzheimer’s Disease; Parkinson’s Disease or Motor Neurone Disease.

There are different types of insurance plans and savings options you can use for funding your long term care needs now or in the future:

  • Immediate Needs Annuities
    These plans pay a guaranteed income for life to help cover the cost of care fees in exchange for a one-off lump sum payment, if you have care needs now
  • Enhanced Annuities
    It is possible to useyour pension to buy an enhanced annuity which is also known as an impaired life annuity, if you have a health problem like a major organ transplant, a long-term illness such as Parkinson’s Disease, if you are overweight or if you smoke. Providers of this type of annuity will use full medical underwriting to ensure they get an accurate individual price for your plan.

Equity Release Plans

These plans provide you with the option to receive a cash lump sum in the form of a loan secured against your home and they may be used if you need funds for your own or a loved one’s care needs, now or in the near future. This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.

Savings and Investments

Whether you have savings or investments already, or are considering this as a solution to your future long term care needs, this provides you the opportunity to plan ahead and ensure your savings and assets are in place for your care needs.  If you are working, saving while you are earning is the ideal time to start.

Planning ahead for long term care needs

If you are already retired, or nearing retirement, we can help you ensure that your affairs are in order such as;

  • Reviewing your estate planning and inheritance tax
  • Going over your savings, investments and other assets in light of any future long term care needs
  • Helping you decide what types of long term solution will best suit your needs

The most important thing is to help you understand the options open to you, so you have greater piece of mind ahead of any needs you or those you care about might have.

Angus Kirk

Financial Planner at Bridge Investments
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