Care home fees planning is a difficult time. Moving into a care home is an experience nobody wants to have; the loss of freedom and dignity is scary for the person involved. Adult children who have to coordinate the residency have to battle pragmatism against feelings of guilt. Understanding the care sector can help manage this stressful and traumatic phase of life, whether it is for you, your spouse, your parents or another family member. This Q&A article delves into various aspects of funding care costs.
What Percentage of UK Adults are Currently in a Care Home?
Statistics from the ONS, approximately 1-2% of all UK adults are currently living in care homes. As of 2021, 2.5% of individuals aged 65 and over in England and Wales were care home residents, of which 56% were aged 85 and over.
Also according to the ONS, in 2021, the median age of female care home residents aged 65 and over was 87 years and 10 months, while for males it was 82 years and 8 months.
Average Length of Stay in Care Homes
The duration of stay in care homes varies, with many factors influencing this length. Studies indicate that the average stay ranges from around 1.5 to 2 years, although some high-quality care settings report average stays of up to 4 years. A study by Bupa on 11,565 residents found that the average length of stay was around 2 years and 2 months. However, half of the residents had died by approximately 1 year and 3 months, Separately, Office for National Statistics (ONS) data shows that for female residents aged 90 and over, the life expectancy was 2.9 years, while for males it was 2.2 years.
Naturally, factors such as the onset of care needs and the quality of care provided can significantly affect this duration.
Understanding the Costs of Care Homes in the UK.
The cost of care homes in the UK can vary significantly based on several factors, including the type of care and the location of the facility. On average, residential care homes cost between £27,000 and £39,000 annually, while nursing homes, which provide more comprehensive medical care, range from £35,000 to £56,000. These costs can be substantially higher in regions like London and the South of England due to the higher cost of living. For example, the median cost for a residential care home in London’s Islington borough is around £82,264 per year, compared to around £33,000 in more affordable areas like Hull and Wigan. More specifically in the South West, the average cost of care is £65,500 for residential care and £77,636 for nursing care.
Key Factors Influencing Care Home Costs
Several factors affect care home costs:
- Location: Homes in high-cost living areas charge more.
- Type of Care: Nursing homes are more expensive than residential homes due to the level of medical care provided.
- Facilities and Amenities: Homes with more luxurious offerings tend to charge higher fees.
- Room Type: Private rooms are costlier than shared ones.
- Care Needs: Specialized care, like dementia care, typically increases costs.
- Payment Structure: Some homes have all-inclusive fees, while others charge extra for additional services.
Planning for Future Care Needs
Without specific insurance products in the UK for long-term care and with so much uncertainty about the probability, timing and type of care required, planning for future needs is difficult. Individuals must look at alternative ways to ensure they can meet potential care expenses. Which usually requires self-funding to some extent.
Assessing Future Care Needs
Start by assessing the potential care needs that might arise. Consider factors like family health history, current health conditions, and preferences for future care. Understanding these aspects will help estimate the type of care needed, whether it’s in-home care, residential care, or nursing care, and the likely duration of such care.
Funding Care Costs
There are several ways to fund care home expenses:
- Private Funds: Many residents use their savings or assets to cover care costs. You can use them to ‘pay as you go’ or purchase a Care Fees Annuity. Care fee annuities function similarly to a pension annuity; however, instead of determining the income by the size of the pension fund and life expectancy, they use the fees and life expectancy to calculate the capital required to buy an annuity.
- Local Authority Support: For those with limited assets, local authorities may cover part of the costs after a means-test assessment. Anyone with assets below £14,250 will have costs fully funded by their LA. Costs have to be fully self-funded if assets are over £23,500.
- NHS Continuing Healthcare (CHC): NHS CHC funds individuals who have a ‘primary health need.’ A detailed assessment determines eligibility by examining the nature, intensity, complexity, and unpredictability of the individual’s needs. The process includes initial screening and a comprehensive assessment. More information is available here.
- Deferred Payment Agreements and Equity Release: These options allow residents, with agreement from their Local Authority, to fund their care using the value of their homes, either by deferring payments or releasing equity.
Financial Planning
Because most residents will need to self-fund in whole or part, it is vital to incorporate potential care costs into retirement planning. Here are several strategies to consider:
1. Savings and Investments: Building a robust savings and investment portfolio can provide the necessary funds when care is needed. You may need to fund this from a pot otherwise designated for general retirement living. You will also need to consider the lifestyle costs of any financial dependents who will continue to live at home and will need money to live on.
2. Property and Other Assets: For most people, their home is their most significant asset. If there is no surviving spouse or partner the situation is straightforward, just requiring a sale. But, where there is a surviving spouse options such as downsizing or equity release plans can provide funds for care. These options involve borrowing money against the value of the home or selling part of it while continuing to live there which does bring risks and disadvantages.
Importantly, a Local Authority can’t force a home to be sold to fund care if a dependent or anyone over 60 will continue to live in it.
3. Pension Income: Using pensions to fund care is another option open to many. You can choose to draw down from your private pension to help cover costs, balancing the need for immediate income with the necessity to keep funds for later care costs. If the person needing care allowance owns the pension they will, again, need to account for the living costs of a dependent.
The same also applies to annuities or defined benefit pensions in payment. The cost of care will probably use most, if not all, of the monthly income received, potentially leaving a surviving spouse with lost income to support their needs.
Government Support and Benefits
It may be possible to get State benefits to help meet the cost of care. It is worth familiarising yourself with entitlements such as Attendance Allowance, Personal Independence Payment (PIP), and the criteria for NHS Continuing Healthcare and local authority funding. Understanding these can provide clarity on what financial support is available and under what conditions.
Legal and Estate Planning
Ensure that all legal documents, such as wills and powers of attorney, are up-to-date. Setting up a Lasting Power of Attorney (LPA) for health and welfare is particularly important. This legal tool allows someone you trust to make decisions about your healthcare and personal welfare should you become unable to do so. Watch this video to understand more.
Understanding the nature of care home needs in the UK is essential for making informed decisions about long-term care. By assessing future needs, planning financially, and understanding legal and governmental frameworks, families can navigate the complexities of care with confidence, ensuring the quality of life and dignity in later years.
Photo by Claudia Love on Unsplash
