Four better ways to pay for long-term
care
Around 70,000 family homes have to be
sold each year to fund long-term care
fees for their elderly owners, says Moira
O’Neill in Money Observer. And as
the population rises, this number can
only rise too: around one in ten 75-year-olds
need residential care, and this proportion
rises for people in their 80s or older.Yet
in recent years, a collapse in supply
(74,000 care places have been lost since
1996 as a rising tide of regulations has
led to many homes shutting down) and steady
demand has pushed up costs.
Residential care now costs £465
a week. But don’t expect the state
to pick up the tab. Unless you require
the highest level of nursing care (in
which case you qualify for £125
per week), anyone with more than £20,000
in means-tested assets - including property
- must pay the full cost.
So how can you avoid selling your home
to pay for care, hence depriving your
children of their inheritance? One option,
if only for a minority of the population,
is to delay drawing your pension for as
long as you can. If you are not well when
you finally take it, you can buy an ‘impaired
life annuity’ that pays out a much
higher than normal income. The second
option is to take out a ‘pre-funded’,
long-term care insurance policy, says
Harriet Meyer in The Daily Telegraph.
However, this cover is expensive (a woman
aged 65 would have to pay £181 a
month to receive £1,000 a month
towards care fees in the future, should
she ever need them), and so is dependent
on you having a high-ish income in the
first place.
There is also only one provider, Skandia.
Another alternative - but one that, again,
will only suit the well off - is an “immediate-needs”
annuity (on offer from PPP Lifecare and
Norwich Union). These high-income annuities
are bought with a lump sum once you decide
that you or a relative needs residential
care, and can be a good way of paying
for open-ended care, says Helen Pridham
in The Observer. The downside is that
if the patient dies promptly, there will
be no return of capital to the estate.
But if the patient lives for many years,
it may turn out to have been a good investment,
paying out significantly more than you
paid in and letting you keep the house.
Immediate-needs annuities are effectively
a bet on life expectancy.
If none of the above are any good to you,
don’t despair, says James Daley
in The Independent. You still may not
have to sell. If you and your spouse own
your property as tenants in common, for
example, or if another family member lives
in the house, the council cannot force
you to sell up. Equally, the owner’s
home must be disregarded from any means
test if he intends to return to it after
a temporary stay in care.
