Self-funding your long-term care: your options

Few of us can afford to pay the high cost of long-term care out of our day-to-day income. But don’t worry, there are other ways to finance your care.

Why you might need to pay for long-term care

  • You don’t qualify for local authority funding.
  • You want to enhance your care at home by paying a little more.
  • You need to make up a care fees shortfall while the local council is funding your care during a deferred payment agreement period.

Check your entitlements and ask the right questions

Before you do anything, check you’re claiming all the State and other benefits you’re entitled to – some of these aren’t means tested.

Make sure you’ve checked out all the local authority and NHS funding options too.

If you move into a care home and your property is left empty, you should receive full exemption from Council Tax until it’s sold.

Other questions to consider include:

  • Is the care you’re choosing affordable over the long term?
  • Have you had an assessment of your needs from the local council, and would they meet the fees of a care home you’ve chosen if you had to fall back on their funding?
  • Or would the care provider continue to accommodate you at local council rates?

How to fund your long-term care

Immediate need care fee payment plan

This is designed to help if you need care immediately. In return for investing a lump sum, you get a guaranteed income for life.

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Downsizing

Selling your home and buying a cheaper one could free up money to pay for your care

Using the 12-week property disregard

What is it?

If you need to live in a care home permanently, you may be entitled to 12 weeks free.

This free 12 weeks is designed to give people time to prepare for their future. It enables you to work out what longer-term solutions will be right for them, before making any final solutions.

If you’re eligible, the local authority must not include the value of your property in your financial assessment for 12 weeks. This is called a 12-week property disregard. The local authority will contribute to your care home fees during this time, or until you sell your property, if sooner.

Who gets it?

To qualify, your savings – capital excluding the value of your property – need to be below the savings threshold. In 2020/21, this is:

  • in England and Northern Ireland, £23,250
  • in Scotland, £28,500
  • in Wales, £50,000 – care in a care home.

That said, the amount local councils will give you differs.

So if you want to go into a care home that’s more expensive than your local council has agreed to pay for, you’ll have to find the extra money during the 12 weeks, or find a cheaper alternative.

People who have not been able to, or don’t want to, sell their homes to pay for their care can enter into a deferred payments agreement with the local council. This is where the council continues to provide their funding towards the care home fees.

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Examples of how savings affect care costs:
  • Jane owns her own home and has £10,000 in savings. This means she’s entitled to the full 12 weeks of free care. This is because she has less than £23,250 in savings and she’s in England.
  • David has £25,000 in savings. He’s over the threshold, which is £23,250. Let’s say that one week in care costs £1,000. David would have to pay his own care for two weeks, until his savings came under the threshold of £23,250.
  • Emma has £50,000 in savings. Even if her care costs £1,000 a week, she would only spend £12,000 over the 12 weeks, taking her to £38,000. This would mean that she’s over the £23,250 threshold, so couldn’t get free care.
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Equity release

This gives you a lump sum or steady income to pay for your care using some of the money that’s tied up in your house, while you carry on living there.

The money must be repaid at a later stage when the house is sold.

It’s important to only consider an equity-release scheme when you’ve looked at all the other options.

Investment bonds

You can use investment bonds to help pay for your care.

However, there’s no guarantee that the returns will cover the cost of your care, and your money is tied up for a long time. So, they’re not generally one of the better options.

Sale-and-rent-back schemes

In a sale-and-rent-back scheme, you sell your home at a discount.

In return, you stay living there as a rent-paying tenant for a set length of time. This is called a fixed term.

This might seem tempting if you want to stay in your home and need to pay for care.

However, only consider a sale-and-rent-back scheme as a last resort. This is because:

  • you’ll get less money for your home than you would if you sold it on the open market
  • you’ll no longer own your home and you will have to pay rent – this might use up money you want to spend on care
  • your rent could go up during and after the fixed term of your tenancy
  • you might have to leave your home after your tenancy agreement ends
  • you could be evicted if you break the rules of your tenancy agreement – for example, if you fall behind with your rent
  • if the person or company buying your home gets into financial difficulties, your home could be repossessed.

It’s important not to sign a new sale-and-rent-back agreement without first getting independent advice about your other options.

Other options for funding your long-term care

  • Rent out your home.
  • Cash in savings and shares.
  • Sell things you own, such as art, antiques or collectibles.
  • Check for insurance policies that could cover care costs.

In some areas, there are schemes called ‘Homeshare’.

This involves having someone share your home in exchange for some low-level support, such as cooking meals or running errands.

This won’t be suitable if you need more complex care.

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Next steps

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Choosing how to pay for your long-term care is a big decision. It’s important to speak to an independent financial adviser to discuss which option is best for you.

Look for an adviser with the specialist CF8 qualification. This means they’re qualified to advise on funding long-term care.

They’ll be able to explain all the costs and risks, and can help with other things, such as arranging your will or setting up a power of attorney.

The ultimate aim is to maximise your income for meeting care costs while, as far as possible, preserving your original capital.

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impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

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Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

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