Long-term care can be expensive and complicated – here’s what you need to know

One reason that working with a financial planner is so important when planning for retirement is that there is a very good chance that it could last for 20 years or more – depending on how old you are when you stop work. According to the Office for National Statistics, men will typically live until the age of 86, and women will live to 89.

While living to an older age is good news, it also brings with it the challenge of later-life care. In 2018, the Guardian revealed that by 2035 the number of 85-year olds needing full-time care will almost double.

While preparing for long-term care is a vital part of financial planning, research featured in a MoneyAge article makes for interesting reading. It reveals that while 61% of over-45s said they would work with a financial planner to prepare for long-term care, just 7% actually did so when making arrangements for themselves or a loved one.

As a client of HarperLees Financial Planning, you may already know that its director and Chartered financial planner, Adrian Quick, is a specialist in long-term care planning. Furthermore, he is a member of the Society for Later Life Advisers (SOLLA), which is dedicated to ensuring excellence around long-term care advice.

As a client, we will have discussed how long-term care fits into your financial strategy. That said, you may have friends or family who could benefit from learning more about its costs and why it might reduce the amount of money they can leave to loved ones when they die. If so, read on to find out more.

The cost of care can be high

Broadly speaking, there are three different ways you can receive care:

• Home care – this allows you to live in your home and receive help from a visiting carer.
• Care home – these homes typically use assistants to look after residents.
• Nursing home – these use registered nurses to provide care for people staying in it.

The amount you pay for your care will depend on your needs and where you live in the UK. Yet Age UK calculates that the national average for home care is £15 an hour, meaning that 15 hours of care a week would cost more than £11,500 a year.

If you need to move into a residential care home the average weekly cost is £704, according to carehome.co.uk, which equates to more than £36,600 a year. If you stay in a nursing home, it could cost £888 a week, or more than £46,000 a year.

This means that if you receive care for two years, you could pay £73,200 or £96,000 respectively. The NHS may pay for your care under the Continuing Healthcare (CHC) scheme if you have dementia or certain health problems.

In 2023 and 2024, the amount you pay for your care is unlimited

In September 2021 the government announced changes to the way you could pay for your care, which were due to come into effect in October 2023. Then in his autumn statement of 2022, the chancellor, Jeremy Hunt, delayed the changes until 2025.

Until then, if you have more than £23,250 in assets you’ll probably need to pay for your care, and there’s typically no limit on how much it may cost you. When the changes come into effect in 2025, however, you won’t pay for your care unless you have more than £100,000 in assets.

If you have between £20,000 and £100,000, the amount you pay will be based on a sliding scale.

Additionally, a new £86,000 cap on care costs will come into force. While this is good news, there is a catch, as the cap only applies to “personal care”, such as washing and eating. Other costs such as rent and energy bills will not be covered by the cap.

According to the Telegraph, someone paying £57,000 a year for residential care will typically only spend £18,000 of this amount on personal care. This, the feature explains, means it would take five years to reach the £86,000 maximum, during which time the total cost of care could be a staggering £296,000.

You may be asked to sell your home

As you can see, care costs can become significant in a relatively short period of time, and any help towards these costs that a local authority provides will be means tested. Furthermore, if the authority does agree to pay for the care, it may ask for your home to be sold when you die so that your family effectively repays the cost of your care.

This could significantly reduce the amount you can then leave to loved ones. If you are asked to do this, you will typically be asked to sign a deferred payment agreement (DPA), which is a legal agreement between you and the local authority.

If you are asked to sign one, speak to us here at HarperLees Financial Planning as we can explain what it means for you and your wealth. Please note, that if you gift assets to loved ones in a bid to avoid paying for your care you could fall foul of the deliberate deprivation of assets rule.

This means that if the local authority suspects you tried to avoid costs, it has the power to claw back any gift that you made to pay for your care.

Get in touch

As you can see, long-term care is complicated and could become expensive, which is why working with us at HarperLees Financial Planning could be a wise strategy. Thanks to our experience in this area, we can create a financial strategy that could ensure that you receive your care in a home of your choosing.

This might be one that is of better quality, located closer to your family, or both. If you or someone you know would like to discuss long-term care and how we can help, please email us on info@harperlees.co.uk or call 01277 350560.

Alternatively, to learn more about later-life planning and care, read out informative guide.

Please note

This blog is for general information only and does not constitute advice. It should not be seen as a substitute for financial advice as everyone’s situation will be different.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change. The information is aimed at retail clients only.