Understanding Care Home Costs and Your Financial Options

The cost of living in a care home in the UK has seen a sharp increase, leaving many families concerned about their financial futures. The Telegraph looked into the crucial details about care home expenses, available funding, and strategies to manage these rising costs without draining your savings.

Soaring Costs in 2023: The Financial Burden of Care

According to LaingBuisson, a healthcare data provider, the average annual cost of residing in a care home has surged by 9.6% from the previous year, reaching a staggering £41,600 in 2023. This increase is not just a random spike; care fees have been on the rise for years. However, the current inflation in energy bills and food prices has severely impacted providers, compelling them to transfer these heightened costs to residents.

Who’s Most Affected?

Primarily, it’s the so-called “self-funders” — individuals who finance their care — who are feeling the heat of these escalating fees. These costs are substantial enough to deplete savings, even for those who have been prudent with their finances over the years.

Helen Morrissey, a prominent figure in retirement analysis at Hargreaves Lansdown, emphasizes that over 137,000 individuals are grappling with these soaring expenses. While short-term care is often manageable, long-term care can strain the most robust financial plans, potentially leaving family finances in disarray.

Government’s Stalled Social Care Plan

Back in 2021, there was a glimmer of hope when Prime Minister Boris Johnson presented a social care plan, proposing a personal care cost cap at £86,000 and an increased limit for support qualification to £100,000. Unfortunately, due to subsequent economic events, these plans were delayed indefinitely, leaving individuals and families in uncertainty.

Essential Knowledge: Navigating the Care System

Faced with these financial challenges, it’s crucial for families to comprehend the available support and strategies to reduce costs. Here’s what you need to know:

Determining Your Contribution: The Means Test

To ascertain eligibility for state funding, individuals must undergo a care needs assessment and a financial means test through their local council. The means test evaluates your assets, including income, savings, investments, and property.

Be cautious with asset gifting intended to reduce your financial resources, as this could be perceived as a deliberate deprivation of assets, potentially leading to a reclaim of those assets for care costs.

Self-Funders’ Threshold

In England, if your savings exceed £23,250, you’ll have to finance your care. This threshold hasn’t changed since the 2010-11 period. If your savings dip below this while you’re self-funding, the council will begin covering the costs. However, it’s advised to engage with your local authority for a means test several months before this happens.

Care at Home: Costs and Considerations

Many prefer to arrange care at home when possible. In 2023, the minimum hourly rate for a careworker is £25.95, as reported by the Homecare Association. While this option eliminates the need for a care home, costs can accumulate, particularly if round-the-clock support is required.

Home Adaptations

Modifications to the home may be necessary for suitable care. Costs for these adaptations can vary significantly. While the council should cover adaptations costing less than £1,000, you may qualify for a Disabled Facilities Grant for more substantial changes, depending on your income.

Understanding Care Costs

The average weekly care home fee in the UK stands at £800. However, location significantly influences the costs, with care homes in south-east England being notably more expensive. Self-funders typically face higher fees, with averages jumping to £1,120 per week and nursing home fees reaching around £1,385.

Government Assistance for Self-Funders

Even if your assets exceed the £23,250 threshold, you’re still eligible for some government aid. This includes the non-means-tested attendance allowance and the NHS Continuing Healthcare for those with complex medical needs.

Running Out of Money: What Next?

If your finances are exhausted by care costs, you’ll qualify for state funding. However, if your care home’s fees surpass the local authority’s budget, you may need to arrange a third-party “top-up” or consider moving to a less expensive home.

Choosing the Right Care Home

Selecting a care home is a critical decision that should factor in location, facilities, and cost. Utilize resources like carehome.co.uk and the Care Quality Commission reports to make an informed choice.

Funding Strategies for Care

Several approaches can help manage the financial burden of care:

  • Investments: Income from dividend-paying funds and stocks can help cover care costs.
  • Rental Income: Renting out property can provide a steady income stream.
  • Downsizing: Selling your property and moving to a smaller one may free up capital.
  • Immediate Needs Annuity: This insurance policy, purchased with a lump sum, guarantees to cover care fees for life.
  • Equity Release: This option allows you to access a lump sum by borrowing against your home value, though it’s not suitable for everyone.

In Conclusion

With care home fees rising and government plans uncertain, understanding your options is more vital than ever. Preparation, knowledge, and the right strategy can significantly alleviate the financial challenges posed by long-term care.