It is important for self-funders to establish how much the care home will cost each year, the benefits that you are entitled to, how much income you require and how best to generate this income from your assets.
It is very important to ensure that you plan properly to ensure that you do not have to move to a different care home at a later stage.
How much the care home will cost each year
If you or a relative are making your own financial arrangements with the care home, you need to make sure you have a contract spelling out the home’s obligations and fees. Find out if anything is an extra and how much notice the care home needs to give if it wishes to increase the fees.
Which benefits are self-funders entitled to?
When you go into a care home, you can still claim a few benefits and there are potential additional state benefits available. The two most common additional state benefits available are the Attendance Allowance and Funded Nursing Care (FNC) for Nursing Care Costs. You can still claim State Pension and other State Benefits. Also, some care and support in the care homes are free of charge.
Attendance Allowance (AA) / Personal Independence Payment (PIP)
Anyone over the age of 65, needing care and support daily, is eligible for Attendance Allowance (AA).
If you are under the age of 65, you may be eligible for Personal Independence Payment (PIP). This benefit is replacing the Disability Living Allowance for people aged between 16 and 64.
The Attendance Allowance is available if you pay for the care home cost yourself, but not if you are local authority funded. If you need help during the day, you will receive £58.70 a week. If you need help during the day and night, or if you are terminally ill, you will get £87.65 a week. The amount is paid tax-free and is not means-tested.
You must claim Personal Independence Payment (PIP) before you reach 65 and you will have to undergo an assessment. There are two parts to PIP, the mobility component, and the daily living component. The mobility component is paid in all circumstances whether you are self-funded or government-funded and it is £23.20 per week for the standard rate and £61.20 for the enhanced rate.
The PIP daily living component is paid to a person in a care home if they are paying for their own care and is £58.70 per week for the standard rate and £87.65 for the enhanced rate.
Attendance Allowance is not available in care homes in Scotland, as everyone over the age of 65 in Scotland is entitled to free personal care, regardless of income, if the local authority has assessed them as needing it.
In England, Wales and Northern Ireland, even if a person is paying for their own care in a nursing home, they may still be able to get help with their nursing care costs, through Funded Nursing Care (FNC) or Continuing Healthcare Funding (CHC).
In Scotland, everyone, regardless of their income, assets or partner status, who is aged 65 and over, receives free personal and nursing (up to a certain limit) if they have been assessed by the local authority as needing it. They will still have to contribute towards their accommodation costs in the care home.
Nursing care costs – Funded Nursing Care (FNC) / Continuing Healthcare Funding (CHC)
Funded Nursing Care (FNC) / Nursing Care Contribution
You may be entitled to receive Funded Nursing Care (FNC) an NHS-funded nursing care contribution in England, Wales, and Northern Ireland. The care home, social worker or GP can arrange to have your nursing needs assessed to find out if you are eligible. This money is only paid if a person who needs nursing care is in a care home that is registered to provide it.
The NHS will pay a flat rate contribution directly to the care home towards the cost of the nursing care.
FNC is a fixed amount each week which is paid to the nursing home. In England, the rate for this is currently £165.56. In Wales, it is £148.01 and in Northern Ireland it is £100. In Scotland everyone will get free personal and nursing care if they need it.
Continuing Healthcare Funding (CHC)
Continuing Healthcare Funding, funded by the NHS, is available in England, Wales and Northern Ireland. Unfortunately, at the moment there is no guiding framework for Continuing Healthcare in Northern Ireland, which means that health and social care teams tend not to mention it. It is available, so you need to ask for it.
The Department for Health and Social Care and NHS England state in their National Framework for Continuing Healthcare, that CHC is not means tested and pays for the cost of a person’s care, funding a person’s health and social care (personal care) needs as well as their care home accommodation.
The care home, social worker or GP can arrange to have your nursing needs assessed to find out if you are eligible. CHC will pay for all your health care and as well as your personal care needs.
To be eligible you must have a ‘primary health need’ and a care and support package will be put in place that meets your assessed needs.
A person living with dementia may be eligible for NHS Continuing Healthcare funding which will cover the cost of their care. However, because people with dementia are often assessed as having social care needs rather than health care needs, they may be found ineligible.
State Pension & Other State Benefits
If you are of state pension age you will still be able to get a State Pension. The basic State Pension is £129.20 a week. You can claim the basic State Pension if you’re a man born before 6 April 1951 or a woman born before 6 April 1953.
If you were born after these dates, you will be eligible for the full new State Pension, which is £168.60 per week. The actual amount you will get depends on your National Insurance record.
You will not have to pay council tax, if you move into a care home and there is no one living in your property.
Other state benefits might be available such as Pension Credit, Incapacity Benefit, Severe Disablement Allowance, Widow’s Pension, Bereavement Allowance, Widowed Parent’s Allowance, Industrial Injuries Disablement Benefit, Statutory Sick Pay, Employment and Support Allowance.
Some care and support in the care home must be free of charge
These include:
- Intermediate care, including reablement (for up to six weeks) paid by NHS
- Aids and minor adaptations to the home which cost less than £1,000 paid by NHS
- The NHS is responsible for funding any after-care in a care home, if the person with dementia has been assessed or treated in hospital under the Mental Health Act 1983
- NHS services
- any services that an authority has a duty to provide based on other legislation
You may also be eligible for other NHS services such as continence aids or specialist services such as chiropody, physiotherapy, pressure relief mattresses and mobility or communication aids.
Different ways self-funders can fund their care
There are several different ways that self-funders can fund their care, each with advantages and disadvantages. The main decision is often whether you keep or sell your home and then there are various options, some of which we have outlined below.
Keeping your home
Rent your home out
If you do not want to sell your home to pay for your care, you can rent it out as long as the rental income covers the cost of your residential care. However, it is important to remember that rental income is taxable.
Deferred Payment Scheme
All local authorities in England, Scotland and Wales have to offer a deferred payment scheme to people living in residential care. In Northern Ireland there is no formal deferred payment system, but it may still be available, you will have to contact your health and social care trust.
The deferred payment scheme means the local authority will pay for your care while you are alive and will claim the money back through the sale of your property after you die. You can only apply for the Deferred Payment Scheme if your savings are below the upper means test threshold.
Local authorities can charge arrangement fees to set up the loan, as well as interest on the loan from the day it is set up. You must sign a legal agreement with the council. However, you cannot use a deferred payment agreement to pay for a short, temporary stay in a care home.
Local councils in Scotland often use charging orders instead of deferred payment agreements. This places a legal charge on a property ensuring the creditor is paid the money owed to them when the property is sold.
Equity Release
If you have a lot of equity in your home, you can consider raising the money for your care by mortgaging your property. However, with this option you will usually end up paying a relatively high level of interest which can make it an expensive way of paying for care.
Selling your home
High interest bank account
One option after selling your house is to find a high interest bank account and put all the cash from the sale of your property in there. The problem is that high interest accounts tend to lock your money away and you need to have it readily accessible so you can pay your care home fees. Also, bank interest rates have been exceptionally low for a good few year.
Invest to generate income
You can look to invest your money into cash bonds, equities or shares to generate income to pay for your care. As you need the money to pay for your care, it is not advisable to opt for high risk investments.
Take out a Care Fee Annuity
You can take out a Care Fee Annuity, which works as a payment plan giving a regular income similar to a standard retirement annuity.
The upside of this is the income is tax free if it is paid directly to the care provider and will provide a guaranteed income to pay for care costs for life.
The disadvantage is that the cost will vary according to your health and age and once you take out an immediate need care fee payment plan, if you change your mind or become eligible for Continuing Healthcare you won’t be able to cancel it and get your lump sum back. If you die six months after going into a care home, your family will lose the lump sum.
However, you can buy a guarantee to insure against dying early so they would still get a lot of the lump sum back, but this can be expensive.
The annuity can allow you to effectively solve your care funding problem using some of your assets, which will hopefully help to protect the remainder of your assets.
