Paying for care home fees is one of the biggest concerns for elderly people and their families when it comes to later life care.
For many people, the cost of elderly care is increasing which means they are unable to pay for care themselves and rely on funding.
Luckily, there are a number of funding options as well as products and services that can support you financially to get the care you need.
This article will cover everything you need to know about paying for care home fees and your options around paying for care.
Disclosure: You should not use this article to make financial decisions. Always seek professional advice from someone who is authorised to provide financial advice.
Here’s a summary of what we’ll cover:
- Care home fees cost between £700 and £1400 a week depending on the care you receive – they can be more.
- Funding is available through the council for people who have less than the upper capital limit of £23,250.
- People with a primary health need that requires nursing can apply for NHS Continuing Healthcare or funded nursing care.
- If you’re not eligible for funding, there are other options such as equity release and care annuity.
How much do care home fees cost?
What you end up paying for care home fees is down to a number of factors that can vary for every individual.
This means that it’s hard to say exactly how much you’ll end up paying for residential care home costs.
You may be eligible for funding, which can reduce the amount you have to pay for care home fees.
But this also depends on factors relevant to your health and financial circumstances, as well as the type of care you want to receive.
Confused about care funding?
What funding options are available?
There are funding options for people who need care but cannot afford to pay for any or some of their care.
This aims to ensure that vulnerable people aren’t left without the right support.
In order to determine whether you’re eligible for funding some or all of your care home fees, you should organise a care needs assessment.
Within this, your care needs and financial means will be assessed so you can start to plan for the services that you need.
Where to find out if you are eligible for funding
The adult social care department at your local council is responsible for assessing people for care funding eligibility.
You must contact them to organise your care needs assessment, which includes a financial means test.
What are the main funding options paying for care home fees?
There are four key funding options to cover care home fees.
Let’s look at them now in detail.
Local Authority Funding
The means test looks at your finances to see what money is available to pay for care based on upper and lower capital limits.
If your individual assets amount to less than the lower capital limit of £14,250, you will receive full funding from the council.
If you have assets over £14,250 but less than the upper capital limit of £23,250, then you may be eligible for some funding for your care.
Either of these options means that the council will work with you to create and pay for (some aspects of if partly funded) your care plan.
Self-funding
If you have above the upper capital limit of £23,250 then you will be expected to cover the full cost of your care.
This means that you are financially responsible for all aspects of your care, so it is important to have a plan in place for how you will pay.
Having a financial plan when paying for care home fees can help you avoid confusion such as are next of kin responsible for care home fees?
NHS Continuing Healthcare Funding (NHS CHC)
NHS Continuing Healthcare is available to people whose care is based around addressing or preventing a primary health need.
If you are found eligible for NHS CHC, the NHS will arrange your care in a suitable facility as well as paying your care home fees.
If your health needs are apparent during your care needs assessment, the council will refer you to the NHS funding scheme.
NHS Funded Nursing Care (NHS FNC)
NHS FNC means that the NHS will pay for just your nursing care costs rather than fully paying for care home fees.
It is a good option for those who don’t qualify for NHS CHC as nursing care costs, which can be very expensive, are covered.
But you are responsible for other care home fees at the nursing home of your choice.
To be eligible, you must live in a care home which is registered to provide nursing care and have been assessed as needing care from a registered nurse.
Personal health budget
A personal health budget can help you with extra costs associated with paying for care home fees for temporary residential care.
If you are staying in a care home temporarily, your personal health budget can pay for up to four consecutive weeks annually.
It is provided by the NHS or local authority to help you pay for services agreed in your care plan.
If you’re wondering ‘what is a care plan?’ you can find out everything you need to know here.
What can I do myself to help pay for care home fees?
Aside from funding, which not everyone is entitled to, there are more options that can help when it comes to paying for care home fees.
Not all of these options will be suitable for everyone and may come as big financial decisions.
So it’s important that you research your options carefully to know how they will affect your finances and ability to pay for care.
Confused about care funding?
Rental Income
If you are planning on moving into a care home rather than paying for care in your own home, your house may be unoccupied.
For some people, this is a good time to create income through renting out your property.
If you are mortgage free, the rental income you receive can be used to pay for some or all of your care home fees.
Be aware that earning extra income could affect your eligibility for any financial benefits for elderly that you receive, so check what you’ll be entitled to.
Equity Release
Equity release is when you use the equity or value of your property as a source of available cash to pay for care home fees.
It is done through taking out a lifetime mortgage or home reversion scheme, in which you sell a portion of your property to a provider for cash.
To use an equity release scheme, you must be a homeowner with a property valued at at least £70,000 and go through a provider.
It can be a risky financial investment, so be sure to discuss your options with a financial adviser who can help you plan for later life costs.
Investment bond income
There are no dedicated products that allow you to invest in later life care such as paying for care home fees.
If you are familiar with investing, a traditional ISA or using bonds are options for creating investment income to pay for care.
This is not to say that they are the best way to pay for care, as they are more medium to long-term investments.
What other options are available?
There are a few other options available to fund care home fees.
Maybe consider one of the following.
Deferred Payment Scheme with your local council
If your money is in property, a deferred payment scheme provided by your local council means that you don’t have to sell your home to pay for care home fees.
They allow you to delay the payment of fees in order to receive care in a residential setting, by using the value of your home as equity.
It is similar to equity release, but there are some differences between products that you should discuss with a financial adviser.
Third Party Top-Ups
If you are receiving local authority funding, you can still have some say in choosing a home that suits your needs, even if it is more expensive.
If you choose a more expensive option, the difference in cost must be paid through third party top-up payments,
These can come from a friend or family member who agrees to pay the agreed amount, and will have to sign a contract.
If paying top-up care fees has become unsustainable, find out more in our guide to care home fees: what happens when the money runs out?
Care Annuity
A care annuity is an insurance product that secures a guaranteed income with a care funding plan to pay for your care fees.
You can buy an immediate needs or a deferred needs annuity, depending on how far in advance you are planning for care home fees payments.
The cost of a care annuity is calculated individually, based on age, health and expected care needs and associated costs.
These types of plan are currently the only ones that guarantee an agreed income for as long as you need it to help when paying for care home fees.
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