With figures for UK life expectancy rising, so too are the number of years some of us may spend in ill health. The inevitable knock-on effect of this means that an increasing number of people will need some form of social care in later life.
In 2018, the Guardian reported that over the next 20 years, the number of adults aged 85 and over needing full-time care in England will almost double.
The report also predicted that “more than 1 million people aged 65 or over will require intensive social care assistance by 2035”.
Care home prices vary across the UK
Although care home prices vary across the UK, the average monthly cost for a residential care home is around £2,816 – or just shy of £33,800 a year. Should nursing care be needed, this annual figure rises to just over £42,600.
How much you may have to pay for your care will depend on several factors, including:
- Where you live
- What type of care you need
- Your savings and property
- The care home provider.
Help at home can be costly too
Even if you don’t need to move into full-time care, receiving support in your own home, otherwise known as domiciliary care, could cost anywhere between £15 and £30 an hour.
Even at the cheapest rate, two hours of support a day could mean an annual bill in excess of £10,000.
The social care cap has been delayed until October 2025
To help with these costs, the government proposed a social care cap.
This was supposed to come into force in October 2023 but, in the autumn statement 2022, chancellor Jeremy Hunt announced that the reforms would be delayed for two years. So, now the social care cap won’t come into force until October 2025.
When it does come into force, the social care cap will stand at £86,000.
While those with assets below £20,000 won’t pay for care, if you have assets between £20,000 and £100,000 you could receive help from local authorities.
Meanwhile, if you have assets exceeding £100,000 you will pay for all of your care until your assets fall below this limit.
In light of this, and increasing life expectancy, it’s vital that you factor potential costs of later-life into your financial plan.
Meanwhile, bear in mind that the £86,000 cap only applies to the costs of your actual care but does not cover accommodation or other living costs like food and utility bills.
According to a report in Metro, these costs could amount to an additional £20,000 a year.
Planning ahead to pay for later-life care
Hopefully, you won’t need care in later-life. However, the possibility of having to meet the high costs of being looked after could be a cause for concern. So, it’s sensible to take steps to ensure that you’ll have sufficient funds to pay for care should you ever need it.
Set money aside
Earmarking certain funds to go towards care costs from your savings or pension fund could be a good place to start. This way you may feel more confident that there’s sufficient money set aside should you ever need it.
You’ll need to make sure that the money you’ve set aside isn’t needed for your retirement income.
You may find it useful to speak to us so that you can be confident that you can both achieve your retirement goals and have the reassurance that you have money to pay for potential care costs.
We’ll use cashflow planning tools to explore the financial impact of various scenarios. By plotting a variety of scenarios and financial inflows and outflows over your lifetime, we can work with you to establish whether you have sufficient funds to meet your lifestyle goals and have extra on the side to cover potential care costs.
Whatever the future holds, cashflow planning can help you avoid coming unstuck down the line.
Downsize to release equity
If you’re concerned that you’re over the means test limit for capital assets but feel you’re short on accessible cash to pay for care, you could consider downsizing your home.
This should mean you’re able to access value tied up in your home. Downsizing can be especially useful if you’ve owned your property for many years as its value may have risen substantially since you purchased it.
Equity release
Should you wish to remain in your home, you could release equity from your house to cover the cost of care.
There are a variety of equity release products. To find a product that best suits your needs and situation, please get in touch. We will be able to refer you to a specialist adviser who can advise you on what is right for you.
Get in touch
If you have any concerns about funding your care in later life, please get in touch. We can help you build a financial plan that includes provisions for paying for later-life care and give you the confidence to live the retirement you want.
Email contactme@kbafinancial.com or call us on 01942 889 883.
Please note
The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes, which cannot be foreseen.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
A Lifetime Mortgage is not suitable for everyone and may affect your entitlement to means tested benefits, so it is important to seek financial advice before taking any action. If you are considering releasing equity from your home, you should consider all options available before equity release.
The interest that may be accrued over the long term with a Lifetime Mortgage, may mean it is not the cheapest solution. As interest is charged on both the original loan and the interest that has been added, the amount you owe will increase over time, reducing the equity left in your home and the value of any inheritance, potentially to nothing.
Although the final decision is yours, you are encouraged to discuss your plans with your family and beneficiaries, as a Lifetime Mortgage could have an impact on any potential inheritance. We would also encourage you to invite them to join any meetings with your Financial Adviser so they can ask questions and join in the decision, as we believe it is better to discuss your decision with them before you go ahead.
