How Much Could Your Care Needs Really Cost You in Later Life?
It is predicted that around 418,000 people live in care homes in the UK, which is 4% of people aged over 65, and 15% of people aged over 85 (1).
Evidently, though a good percentage of over 85s are in a care home, it is not the majority of the elderly population.
There are various reasons people may choose to not go into a care home. Firstly, they may be lucky enough to have family members who can care for them, which means they can stay in their home while they are cared for.
This is extremely beneficial as they would be able to stay in a familiar environment and they wouldn’t have to pay for expensive care.
Another reason people may avoid care homes is that they have enough money to pay for a live-in carer. They may have acquired this money through saving over the years or paying into their pension.
On the other hand, we cannot deny that care homes are essential for many people. If someone does not have family available to care for them, or their health has deteriorated to the point that they need 24/7 care, care homes can be life-saving.
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Are there More State-Funded or Self-Funded Care Home Residents?
In terms of how many people are paying for their own care, it is difficult to say, as we have to rely on care home statistics that include younger people who need care due to having health conditions.
However, if we do look at these statistics, we see that 63.3% of care home residents were state-funded from 2019-2020, while 36.7% were funding their own care (2).
Not everyone is eligible for state-funded care, which explains why a good proportion of care home residents are paying for themselves. Some people are also not aware that they could apply for help with care home costs, so they use all of their savings or borrow from loved ones instead.
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What are the Options For Care?
There are various options for people in the UK when it comes to later-life care. Here is a couple:
1. Staying at Home
Some people prefer to stay at home rather than have to adapt to a different way of life, whether that be in a care home or in an assisted living facility. This can be beneficial for mental health, as being surrounded by familiarity is calming.
This will almost always involve home improvements, as most people do not live in a home that is suitable for their later years. They may want to install equipment such as a stair lift, or they may want to adopt a more minimalist approach in terms of their furniture and the layout of their home.
Another option is to downsize. Some people move into a more manageable house that is already set up for people in their later years, and not only does this provide them with everything they need, but it also saves money on their bills.
However, they will be paying out for a live-in carer (unless a family member can care for them), which may cancel out the reduced bills.
However, it goes without saying that this is not an option for everyone. If you are struggling to manage everyday tasks and you have serious issues with your health, there may be no other option than to seek permanent care.
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2. Living in a Care Home
Care homes are great options for people who need round-the-clock care, particularly if they are suffering from a progressive illness such as Alzheimer’s. Patients in care homes usually have access to a private room and ensuite, communal areas, and regular activities.
Something to keep in mind if you are considering a care home is that it can be lonely at times. Most people in care homes suffer from some form of dementia, so if you are still doing well mentally, you may struggle with the social aspect of living in residential care.
If you are considering going to a care home, it is important to know that there are two types. There are nursing homes that have a qualified nurse on-site at all times, and residential care homes that provide a lower level of care (3).
This means you would be safer in a nursing home if you have any serious conditions that need to be monitored, but a residential home is more favourable for people who are more independent.
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What are the Costs of the Different Care Options?
If you want to stay at home with a live-in carer, you can expect to pay around £1460 per week for yourself and £1700 per week if you are in a couple.
In contrast, it would cost around £621 per week for an individual to live in a residential care home.
It goes without saying that the care costs will vary depending on the area you live in, the care home or live-in carer you select, and the specific options you choose.
For example, a shared room in a residential home will be cheaper than a private room.
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How Can I Pay For My Care?
Below, we explain three common ways to pay for your care in old age:
1. Sell your home
One way to pay for care in your later years is to sell your home. This will of course only be feasible if you are the only one left living in your property.
Selling your home may be very time-consuming, which is something to be mindful of if you need the money as soon as possible. It can also impact your entitlement to state benefits, so you should speak to an adviser before going ahead with this.
However, an advantage of selling your home is that you will be able to receive a lump sum of money that will go a long way for covering your care costs.
What’s more, you may be able to leave a large inheritance to your family with the money that you do not spend on care costs.
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2. Pension
Another option is to use the money you have left in your pension. This is a great option for people who have been putting money into their pension for years. However, some people do not have enough money in their pension to do this.
People who have been self-employed for many years and haven’t put any money away for retirement wouldn’t be able to take this route.
Anyone with large gaps in their employment history may also struggle.
3. Rent out your home
Some people choose to rent out their property rather than selling it, as this allows them to continue to get an income from it each month.
If the value of the property rises over time, the person in care (and eventually their family) would benefit from this.
Another advantage is that people can keep their homes through this method, and this is great for anyone who wants their family to inherit their property.
On the other hand, the rental income will not necessarily be enough to cover your care costs, and you would usually need money in your pension and savings to top it up.
There is also the issue of availability of tenants, as you may find that there is nobody who wants to rent out your house, or that there are periods where you are without tenants, which could be catastrophic for your finances.
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Is NHS Funded Care Available?
Yes – people with certain disabilities qualify for NHS-funded care. Some people that may qualify include: people who are detained under the Mental Health act, people who have a high level of healthcare needs, and people who live in a care home and are in need of nursing care (4).
Anyone who qualifies for this scheme can access free healthcare in their nursing home, hospice, or own home.
Are Care Costs Different in Different Parts of the Country?
The cost of care homes varies widely depending on where you live in the UK. England is the most expensive for nursing care, at £979 per week, compared to just £706 per week in Northern Ireland (5).
However, in terms of residential care, Scotland tops the list at £769 per week. Northern Ireland is again the cheapest on the list, at just £551 per person per week.
Not only are the fees different in each country, but they also vary across regions. Generally, regions with a higher cost of living will have more costly care homes, but various other factors come into play.
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Is there any Way to Avoid the Care Home Fees?
The best way to avoid care home fees is to try to stay in your own home for as long as possible. However, this is not a good idea if you are in need of 24/7 care. You could employ a live-in carer instead, but this would be even more expensive.
As we mentioned above, another option is to try to get NHS-funded care. This would only work if you met the eligibility requirements.
Finally, it is sometimes possible to access local authority funding through a care needs assessment (6). In this assessment, you will be asked about the difficulties you face each day and how you believe you could be helped.
People with a large amount of savings (above £23,350) may not be able to get council funding, but you could put these savings towards your care costs.
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How Can Equity Release Help me to Cover the Costs of Care?
More and more people are releasing equity from their homes to pay for their care costs. This is a wise idea for several reasons.
Firstly, equity release loans do not have to be repaid. Instead, the equity release lender takes some money from your house sale when you pass away.
This means that when you take out equity to pay for care, you do not have to worry about how much of the loan you spend, as you are entitled to all of it with zero repayments necessary.
Secondly, you can release equity regardless of the income you have. Even if you had a very low-income job with no pension and no savings, you could still be eligible to release equity to put towards care home costs.
This means equity release is more accessible than some schemes that exclude people with few funds.
Finally, you can release a large amount of money from your property with equity release, especially if you live in a high-value home. Most people release 20-60% of their home’s value, which is certainly enough to pay for care.
There are some people who should avoid equity release as a way of paying for care. If you are keen on leaving a large amount of money to your loved ones, it may be better to rely on your pension, savings, or traditional loans instead.
This is because equity release reduces the amount of inheritance you can leave to your beneficiaries.
What’s more, some people are not able to pursue this as they are not eligible for an equity release loan.
This may include people who are not homeowners, who are less than 55 years old, whose property is low value, and who have an existing mortgage that they are still paying.
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What Happens If I Need Permanent Care After Taking out Equity?
If you take out equity and then further down the line you are in need of permanent care, your equity release plan will come to an end naturally. This means the equity release lender will sell your home and take some of the money from it, depending on how much you have borrowed.
You may be able to request some of the funds for your care beforehand, but if not, the remaining funds will go to you and you can choose to spend it on your care costs or you can give it directly to your family.
If you have taken out a joint lifetime mortgage and your partner is staying in your house, the equity release plan will not come to an end until your partner dies or enters long-term care.
This becomes complicated if you have taken out a mortgage individually, as it means your partner would have to vacate the home when you entered a care home.
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Get Help With Your Care Home Costs
If you are interested in using equity release as a way to fund your care costs in your later years, get in touch with us on 0330 058 1579 or request a callback here.
We are also open to discussing other options for care, so we will not recommend equity release if we do not believe it would benefit you.
If you are a long way off needing 24/7 care but you are interested in equity release, we are also happy to talk to you about what equity release is and how it works.
It is important to consider your future needs when you take out equity, so it is still important to think about how your current decisions regarding equity release would impact your future.
If you are struggling to cope with the current cost of living crisis and you want tips for saving money, whether it’s for care costs or something else, have a look at our blog post that equips readers with excellent ideas for budgeting in retirement.
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References
[1] Facts & Stats https://www.mha.org.uk/get-involved/policy-influencing/facts-stats/
[2] Ibid.
[3] What’s the difference between a Care Home and a Nursing Home? https://comptonview.co.uk/blog/whats-the-difference-between-a-care-home-and-a-nursing-home/#:~:text=The%20main%20difference%20is%20that,a%20higher%20level%20of%20care.
[4] Getting help with care fees from the NHS https://www.payingforcare.org/getting-help-with-care-fees-from-the-nhs/
[5] Care home fees https://www.which.co.uk/money/pensions-and-retirement/financing-later-life-care/care-home-finance/care-home-fees-asntd3w1s3bg
[6] Ibid.