Long-term care in a care home is very expensive, and can quickly erode your savings (including the equity in your property).
It’s a complex area but, if you are a home owner with savings and a reasonable pension, then if you (or your partner) need care (at home or in a care home) it is likely that you will incur significant costs, whilst not getting much, if any, help from the State until your savings have been reduced.
Residential care costs vary a lot, but basic care (for the infirm with no medical conditions) starts at around £300+ pw, rising as more medical and nursing needs arise.
If you live in England or Northern Ireland and have over £23,250 in capital assets, or in Wales and have over £24,000 (care at home) or £50,000 (care in a care home), or in Scotland and have over £28,000, then you are not entitled to financial assistance.
If you live alone then your house is taken into account and you would be expected to sell it to pay for your care.
If you have a partner (spouse or civil partnership) then seek advice.
Long-term care is a type of insurance designed to provide funds should the person need to go into a care home, typically as a result of old age and its associated problems.
If you are retired, approaching retirement, or would consider yourself to have a potential financial responsibility for an elderly relative, you should talk to your financial adviser about long term care and the options open to you.
There are also product options for those entering care, or who expect to do so.
Immediate care products
They are attractive because the problem faced by the individual is that if they live a long time in care, they could exhaust their resources.
These products are not cheap and are a last resort, the main practical purpose of which is for couples to protect the surviving partner from financial worries.
A couple live in a house, which they own. They have modest pensions and perhaps £20,000 in investments. It becomes clear that one of them will need to go into care, but it is also clear that they may live for several years after doing so. The savings would soon be gone. To afford a good care home, the house is sold and soon those savings start to be eroded. The surviving partner could easily spend a lot of their money looking after their partner.
An immediate care product allows for an alternative process.
The house is sold. Some of the money is used to buy the care package, and the rest is divided between savings and the purchase of a replacement home for the survivor – typically a flat. This means that the survivor can face the future on a financially stable basis, without worrying about care fees.
The value of investments can fall as well as rise and you may not get back the amount you originally invested. Tax rules and allowances are not guaranteed and may change in the future.