For many people, the prospect of having to pay for care for long periods is a genuine concern. Carl Lamb explores the facts and figures involved.
Paying for care can make major inroads into a family’s wealth: local authority help is only available to those with assets worth below a meagre threshold of just £23,250 (2020/21 figure in England) but there is a serious risk that anyone in long term care could erode their estate so significantly that this threshold might be reached.
The average cost of staying in a residential care home in Norfolk (according to the Which? Later Life Care calculator) in 2019 was £762 per week, which is £39,624 per year. If nursing care is required, the cost increases to £921 per week, which is £47,892 per year. If care is being provided at home, costs will vary depending on the level of care needed. Rates for care at home in Norfolk are an average of £21 per hour.
We are sometimes asked what can be done to avoid paying care fees. My response is that you shouldn’t attempt to avoid them if at all possible. Paying for care yourself gives you the widest choice and flexibility in terms of the care package you engage. Local authority support will only provide a basic package.
It’s important to bear in mind that you cannot give away assets specifically to avoid paying care fees: this would be considered deliberate deprivation of assets. If the local authority deemed you to be guilty of this type of action, they could count the assets given away as part of your wealth so you could be stuck with paying full fees without the resources to pay them. However, it is possible to manage the size of your estate through a long-term strategy of gifts and other measures that will, for example, help to mitigate any Inheritance Tax (IHT) that might be payable on death.
You will, of course, be able to use your normal pensions and other income sources to pay for care. Adjusting these and looking at other investments that could provide top-up income are key planning areas for anyone looking at paying long term fees.
Another solution might be to purchase a special Care Fees annuity – also known as an Immediate Care Plan. This would involve spending a significant lump sum to buy the plan, but the arrangement would provide a top-up to your income for life. The plan can be set up to increase with inflation and is tax-efficient for you, if paid directly to the Care Home.
These are just examples of how planning might help you manage the cost of care. An independent financial adviser will be able to support you and your family both to understand the options available and to put in place any plans or strategies you adopt.
Any opinions expressed in this article are subject to change and are not advice. Any solution described may not be suitable for everyone.
Smith & Pinching are Chartered Financial Planners. If you would like a no-cost exploratory review to discuss your financial planning with an adviser, call us today on 01603 789966 or email firstname.lastname@example.org.