Ongoing care - what are the options?

Seeing that someone needs care can be incredibly emotional and an added financial strain could add to this distress. It’s important not to assume that there is only one route available. Many people think that the only option is to go into a care home and to self-fund the care when there are in fact other choices available. Here, we discuss these options and other considerations in detail.

For those who are likely to need care soon or are already at the point of needing care, the first step is to contact their local authority. Every local authority is duty-bound to carry out a care needs assessment on request. They consider what benefits people are entitled to and look at exactly what care options are available. In many cases, this does not mean going into a care home. Often, someone can receive adequate care in the comfort of their own home quite easily.

It’s also important to speak to another relevant professional service, such as a financial planner who is accredited by the Society of Later Life Advisers (SOLLA). They can look at the current financial situation of a person who needs care to see what options are available to them, including purchasing a care annuity, taking out a deferred payment agreement or drawing on their assets.

This depends on personal circumstances and how much money the person who needs care has.

In some cases, the NHS will cover the full costs of care (known as NHS Continuing Healthcare). They will carry out an assessment for suitability. It is important to bear in mind that the NHS do decline many applications to cover care costs in the first instance, but some appeals are successful.

Those who are eligible may receive financial support from their local authority. How much support they receive depends on how much capital they have. As of the 2022/23 tax year, the rates are:

• Less than £14,250 in England and Northern Ireland (£18,500 in Scotland, £24,000 if you receive care in your own home or £50,000 if you receive care in a care home in Wales) – they will receive full funding for their care
• Between £14,250 and £23,250 in England and Northern Ireland (£18,500 and £29,750 in Scotland, partial support is not available in Wales) – their local authority will assess their financial situation alongside their care needs to work out how much financial support they are entitled to. Their local authority may also pay towards their first 12 weeks of care costs
• More than £23,250 in England and Northern Ireland (£29,750 in Scotland, £24,000 if you receive care in your own home or £50,000 if you receive care in a care home in Wales) – the local authority will not pay towards the cost of care

If the amount of capital is above the threshold for receiving support, care will need to be paid for personally, known as self-funding.

Many people are concerned that they will need to sell their home to fund the cost of care, but this isn’t always necessary. There are many different self-funding options available including drawing on savings and investments, purchasing a care annuity or setting up a deferred payment agreement.

It is, however, important to remember that in some cases, selling a home to pay for care is the right decision. This can take away the stress of renting it out or the worry of it being left empty.

A care annuity can be an effective way of funding care for life while preserving capital. Similar to pension annuities, long-term care annuities are purchased for a set lump sum and then pay out a regular income to cover ongoing care costs. A care annuity is purchased at the point of needing care. If a power of attorney is in place, the attorney can purchase a care annuity on behalf of the person who needs care. The key benefits of a care annuity are that they can cover the cost of care for life and if the payments are made directly to the care provider, they are tax free.

Although it’s easy to obtain a quote for a care annuity, they can only be purchased through a suitably qualified financial planner. They assess the benefits of putting this type of plan into place as they are not suitable for everyone. There are many different types of care annuities available and a financial planner can help to establish which is the right one.

If someone needing care in a care home wishes to retain their home but needs additional capital to fund their care costs, they could apply for a deferred payment agreement. This offsets the cost of care as a charge against their property, usually up to a maximum loan-to-value of around 70%.

On the death of the person receiving care, if the beneficiaries wish to sell the property, they can and the cost of care which has been levied against the property can then be paid off from the sale proceeds. If the beneficiaries wish to keep the home, the executors of the Will can settle the outstanding charge personally.

The main benefit of a deferred payment agreement is that the property can be rented out and the rental income can also be used to pay towards the cost of care (if necessary) and the property can continue to grow in value instead of being sold.

This depends on the type of assets held and what the individual circumstances and wishes of the person needing care are. A financial planner can recommend the best order to draw on these in a tax-efficient manner.

Certain assets are shielded from inheritance tax, such as a pension, or assets that qualify for business relief, and it is often beneficial to hold onto these for as long as possible. Others may be considered ‘cherished holdings’ and the person may have a great desire to pass them down the generations. Selling these to fund care costs should be a last resort.

The best way to help someone who may rely on you in the future is to put in place a power of attorney. There are two different types of power of attorney; one covers financial affairs and the other applies to health and welfare. They are simple to set up and often a solicitor will act on your behalf to make sure that they are completed, submitted and registered correctly. Having a power of attorney in place at the point of needing care is extremely valuable as it alleviates a lot of the pressure and stress for everyone involved.

When someone loses the capacity to act for themselves, an attorney can automatically step in and take control. Without a power of attorney, in order to act on someone else’s behalf, you will need to apply to the Court of Protection for a deputyship order. Although a deputyship order would be necessary in these circumstances, it’s important to note that this can be an expensive and drawn-out process. Applications for deputyships can easily take six months to go through and there’s an initial fee plus ongoing fees to be paid once it is established.

We always encourage people to have a power of attorney in place irrespective of how old they are because they can be used at any age. It’s not just the elderly who end up needing care. People of all ages suffer life-changing injuries and there are many other conditions which can occur at any point in life that require life-long care. It’s always better to be proactive rather than reactive.

The Government are proposing to introduce a social care cap of £86,000 from October 2025. This proposed cap is to be used towards the cost of care over someone’s lifetime.

This headline figure grabbed an awful lot of attention when it was first announced by the Government, but it can be a little misleading. The £86,000 limit only applies to ‘eligible needs’ as determined by the local authority in question. It does not include additional care costs or accommodation costs. Any payments towards care made between now and October 2025 will not count towards the cap. Therefore, it could take a long time to reach the cap. Even when it is met, you will still be liable for other costs going forward (subject to thresholds).

There are also proposed changes to the thresholds for local authority support from October 2025. The lower limit will increase from £14,250 to £20,000 and the upper threshold will rise from £23,250 to £100,000. If your personal wealth drops below £100,000, help will be provided on an escalating scale.

A financial planner can provide a full analysis of the impact of the social care cap and threshold rises.

Please note, the proposed social care cap and revised thresholds only apply to England. At present, the rules in Wales, Scotland and Northern Ireland are not set to change.

When a person requires care, a financial planner can help them and their representatives by carrying out a care needs analysis. This involves using cashflow modelling to forecast the person’s financial future using several different scenarios. These might include paying for care themselves, purchasing a care annuity or taking out a care annuity and investing any surplus money. With this information, a financial planner will help you to answer the question ‘what is the best way to fund the care?’

Care costs tend to rise faster than the rate of inflation, so it can be quite difficult to keep them in check. At Evelyn Partners, we have financial planners who are accredited by SOLLA, with nationwide coverage. Our financial planners can be engaged on an ongoing basis to ensure that care costs continue to be met over the course of someone’s lifetime. If there are investments included and used to fund the costs of care, we continue to review them to make sure that they remain suitable and meet the targets set out for them.

Our experts place the needs of the person who requires care at the heart of everything they do and preserve their voice in the whole process. We proactively engage with them to whatever extent they wish or are able to be involved and take into account their wishes, views and beliefs.

Sophie’s mother, Carol, required residential care. Carol had previously set up a power of attorney where she appointed her daughter as her attorney, meaning that Sophie could now act on her mother’s behalf.

We were approached by Sophie to assess the best way to pay for Carol’s care costs. Carol had just sold her home and had a large cash sum sat in her bank account. Sophie’s first instinct was to pay for the care fees using this lump sum and run it down over time.

Through the use of cashflow modelling, we were able to provide a range of other options, aimed at preserving Carol’s wealth and giving Sophie the peace of mind that the money to pay for her mother’s care would not run out. One of the solutions was to use the cash to purchase an immediate care needs annuity and invest the surplus figure. The main benefit of this option is that the annuity would pay for Carol’s care throughout her lifetime and the invested amount could either be used to provide Carol with additional support in the future or could be left to her beneficiaries on her death.

Sophie was able to see the benefits and drawbacks of all the options available to Carol and is safe in the knowledge that her mother’s care fees will be covered for life.

If you have any questions about paying for care and your options, speak to Evelyn Partners. Whether it’s for you or someone else, our experts are here to help. Book an initial consultation online or call us on 020 7189 2400.

* This case study is based on a real-life client scenario. Names have been changed to protect identities.

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