28 January 2016

Self-funding long-term care

Few of us can afford to pay the high cost of long-term care out of our day-to-day income. If you need to pay for care – don’t worry. There are other ways to finance your care

Why you may need to pay for long-term care

You don’t qualify for local authority funding.
You want to get enhance your care by paying a little more.
You need to make up a care fees shortfall.

Check your entitlements

Before you do anything, check you’re claiming all the state and other benefits you’re entitled to.

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

Benefits you can claim when you have care needs

Local authority funding for care costs – do you qualify?

Registered Nursing Care Contribution

Are you eligible for NHS Continuing Care funding?

How to fund your long-term care

Immediate need care fee payment plan

Designed to help if you need care straightaway. In return for investing a lump sum you get a guaranteed income for life.

Downsizing

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

Find out more about downsizing your home to fund your long-term care.

Deferred payment agreements

If you need to go into residential care and most of your money is tied up in your home, your local authority may offer you a deferred payment agreement.

This means you don’t have to sell your home to pay for care straightaway. The local authority will reclaim what you owe in fees at a later stage when the house is sold.

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. You should only consider an equity-release scheme once 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.

Case study

“You’d be amazed how many people sell their home, but then run out of money a few years later and end up making do with local authority funding. If only they’d taken independent advice.” – Anne

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

You will get less money for your home than you would if you sold it on the open market.
You will no longer own your home and you will have to pay rent. This may use up money you want to spend on care.
Your rent could go up during and after the fixed term of your tenancy.
You may 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.

The Financial Conduct Authority (FCA), the UK’s financial services regulator, is investigating bad practice in this area.

Don’t 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

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

In some areas, there are schemes called ‘Homeshare’. You can let a younger person 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.

Find out more about homeshare here