Whether you are thinking about your own future, or that of elderly parents or relatives, the issue of how to fund adequate care in old age is an important one — and one that is too often left to the last minute.
However, experts are clear that the earlier you consider these issues, the better the chance of finding the right type of help for your family, and the less stressful the experience will be.
‘It is always best not to do these things in a rush,’ says Janet Davies, who runs specialist care advice group Symponia.
‘Instead, ensure that you talk to family members about what they would like and take them round different options, if allowed by Covid restrictions.
‘Discussions about how to pay for care should also be had as early as possible.’
It can be hard to know where to start when dealing with this topic. The steps below should help you to understand the different options and prepare for what can be a very stressful time for the whole family.
Get the legalities in place first
One of the hardest things to deal with when a family member needs care suddenly, is how to handle their day-to-day finances when they cannot do so themselves. Ensuring you have powers of attorney in place well in advance makes this easier.
Sarah Coles, personal finance expert at Hargreaves Lansdown, says it is important to have both a lasting power of attorney (LPA) for health decisions and another for financial ones. ‘If you lose the ability to make your own decisions, an LPA means you can nominate someone you trust to make them for you,’ she explains.
‘If you don’t have an LPA in place, someone will have to be appointed as a deputy instead, which can take much longer and cost more, which can cause major issues if they need to pay for care.
‘If you have to appoint a deputy, a court will decide the limit of their powers. There are also annual fees, and the deputy is supervised by the Court of Protection, so they usually have to produce an annual report detailing any decisions, along with income and expenses.’
Registering your power of attorney can take ten weeks, so it is best to do this as early as possible. There’s more information on how to do it at gov.uk/power-of-attorney.
Talk about your family’s wishes
Once the legal framework is in place, it is time for some tough conversations. Talking about needing care can be difficult, since few people like to think about not being able to live independently.
A conversation about the costs of needing care in the future, and whether elderly parents have particular preferences for a residential home or carers coming into their own property can be very helpful at this point, however, since it helps you to know what to plan for.
‘You might find that your mum knows that her friend is having a good experience in a certain place and is happy to go there, for example,’ says Janet Davies, of Symponia.
The quality and cost of residential homes, and of at-home carers, varies widely, so it is good to research in advance.
Care at home is often an option, too, whether using an agency such as Helping Hands, or new website Curamcare, which allows insured self-employed carers to register their services, keeping costs down and ensuring that you are dealing with carers paid above the minimum wage.
Think about the costs
A recent study from equity release and retirement finances business, Just Group, shows most of us are shocked by the cost of care, and also by the lack of financial support from the Government.
‘If most people’s planning consists mainly of crossing their fingers and hoping it never happens to them, it is little wonder they end up experiencing a system they find confusing and expensive,’ says Just Group’s communications director, Steve Lowe.
It is hard to know in advance how much care will cost. You don’t know how long your family member will need it for, or at what level. But it is good to get an idea of what the costs might be — and what help might be available.
According to Which?, the average cost of a residential care home in 2019-20 ranged from £551 a week in Northern Ireland to £858 in Scotland.
The average cost per week in England is £681 for a residential care place, and £979 for a nursing care place.
The main difference is that a nursing home always has a qualified nurse on-site to provide medical care, while a residential home may not. Nursing care homes are necessary for those elderly patients with more complex needs.
Discuss payment options
Families have different ideas about how care might be funded. In some cases, there may be savings available and families may be confident they will be able to last the course with these. Others might consider schemes such as equity release, which allows you to take some money out of an individual’s home to pay for care, or they might consider selling a property.
These are all big steps, and there are potential pitfalls with all plans, so it is worth talking to a financial adviser who specialises in care funding. Advisers who are members of SOLLA are well-placed to understand your specific needs.
There are care annuities and other plans available whereby, for a specific lump sum, you can guarantee that money is paid to the care provider to fund care for the rest of an adult’s life. While these plans are very good value if someone lives for a long time, they are much less so if someone spends a short time in care.
Janet Davies, at Symponia, says it is possible to build in some protection so that if someone dies very shortly after a plan is bought, some money is returned to their estate. And even if you don’t think this type of plan is right for your family, it is a good idea to get some quotes.
‘The people who look at these are highly specialist actuaries, and the calculations they provide will give you a good idea of care costs and how long someone might be expected to live in a home,’ she says. ‘This is much better than relying on your instinct.’
Understand the process
When the time comes to discuss an imminent need for care, your first step is the individual’s local authority.
The authority carries out a Care Assessment, which is free and not means-tested, and will help you to know what care the individual needs, what is available and whether he or she is eligible for funding.
A care plan will then follow, showing what is needed and whether any help is available from the local authority.
Armed with this, your family will be able to find a suitable residential home, or at-home care for your family member, hopefully with less stress thanks to the advance preparation you have put in.
Check the rules when it comes to funding
Care home funding is complex, and you may find that your family receives little help from the Government.
It is a particularly difficult situation at the moment because reforms of social care have been delayed by the pandemic, and a promised cap on care costs has seen legislation passed but not implemented.
Although this makes it hard to plan, there are some things we know. If you go into a residential home or require home care, you will have to pay for it yourself unless you have a limited amount of savings.
In England, the council will meet the full cost of care for those with savings and assets of less than £14,250 while those with more than £23,250 are expected to meet their own costs in full. In between these figures the cost is split between the individual and the Government.
If you receive care at home, the value of your house is not included in these savings and assets, and this is the same if a spouse or dependent occupies the property.
In some cases, if the need for care is primarily physical and nursing care is required, the NHS will pay for your care under what is known as a ‘continuing care’ package. In practice this is not often the case with elderly people in care homes, so you cannot assume that your family member will receive this help.
Even if someone is funded for local authority care, this may not cover the type of residential home or care you would wish.
In this case, a family may have the option of topping up the payment from the local authority to ensure that the care received is satisfactory to you.
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