Welcome to agespace money, the podcast that gives you insight, ideas and perspectives on elderly care and finance.
This podcast is presented to you by Annabel James, Founder of Agespace, which is a one-stop online resource for anyone looking after, or caring for, an elderly parent; and Jason Butler, financial wellbeing expert and author of “Money Moments: Simple Steps to Financial Wellbeing”.
This podcasts tackles the tricky topic of funding care.
These days, people are living longer and longer. For example, if you are 60, you have got a 50% chance of living beyond 90; if you are 40, you have got a 50% chance of living beyond 95, and if you are 20, you have got a 50% chance of living beyond 100. Care fees will affect most people in their mid to late 80s, and onwards. Whilst there is wide variation of needs among older people, from needing basic help around the house, to having complex needs requiring residential care, there is a very good chance that most of us will need some kind of help, at some stage, when we’re older. This is an issue we need to think about, as it’s expensive, and in England, you will need to fund your own care if you have more than the means-tested amount of £23,000, (this is slightly different in Scotland, Wales and Northern Ireland).
So, here are some top tips on how to think about funding care:
STEP 1: Have the conversation with your parents or the person you are caring for about the future potential need for long-term care, before they need it.
There are three key questions you should ask them:
- Where do they want to live when they are older and requiring care?
- If they will need care, what kind of care do they want? Would they like this to be in a care home, or at home?
- How are they going to fund this?
Think about where you or they would take the money.
It’s worth noting that the average time spent living in a care home is around 4.5 years, and less than 5 years for the most expensive care home settings for people with high needs.
TOP TIP: A financial adviser or financial planner can help you to model the different ‘what if’ scenarios, and how things might need to change if these happen – you don’t need to know all the answers!
STEP 2: Plan for the future.
- Be wary of organisations that sell seminars about protecting your assets from long-term care fees (Jason Butler). Doing this could mean you lose choice or control over your care; when assessing your entitlement to funding, the Local Authority could challenge your arrangements as a ‘deliberate deprivation of assets’, if, for example, your house is wrapped up in a trust, which means this could be added back in.
- Work out how and from where you will fund your care, and your ‘What if’ scenarios. Again, a financial planner can help with this.
- You can loan money, as that’s not out of your estate, and can be paid back.
- You may consider buying an immediate care annuity. This is where you give a lump sum of money to an insurance company, and they pay a guaranteed amount until you die. A care annuity moves the risk of someone living more than 4-5 years in a care home, which is the typical care fee, to the insurance company.
TIP: Taking out a care annuity could be a good option for people with multiple needs, as the insurance company will charge you less for the income if you have multiple needs.
- The question for some families is, “Shall we buy some insurance to provide an immediate lifetime income, to meet some of the fees?”, – it is rare to buy insurance to cover all of the fees, because no-one knows how long they are going to live. This could be an option if you or your parents have a large portfolio, and if the dividends and rental income from the house are enough, as you will just be giving away the inflows coming into the family for care fees, and the capital will hopefully still be intact.
- You may consider converting your pension into lifetime income, (if you’ve got good health, you’ll get a certain level of income; and if you’ve got poor health, you’ll get an even higher level of income).
- The decision on how you take your pension benefits, including if you’ve got a defined benefit pension, is all interlinked with your care needs in later life.
- If you’re going to need care and likely to live a long time, you probably want a defined benefit pension, and what’s known as an impaired life pension annuity from your pension pot, as if you’re relying on investments, you might find that these get dissipated, and you run out of money.
- TOP TIP: A good SOLLA (Society of Later Life Advisers) accredited independent financial adviser can help you to think and plan about these things, when you come to needing care.
STEP 3: Get an assessment of your care needs.
- Everyone is entitled to have their care needs assessed by the Local Authority.
- If you have very complex needs and meet the criteria for NHS Continuing Care, then all of your care will be funded by the NHS. However, this affects only a very small number of people.
- At the other end of the spectrum, people requiring lower levels of long-term care, who have more than the means-tested amount of £23,000, will need to fund all of their care themselves, until they don’t have any more money.
- However, many people qualify for a contribution towards their care from the NHS, if they require an element of nursing care.
- The first thing to do is to have an assessment to find out what your options are, and what you need to do.
SUMMARY OF TOP TIPS:
- Have the conversation with your parents, or person you are looking after, about funding care and what their preferences are, before they need care. Put your own interests first (around funding your own care), before helping the rest of the family.
- Think very carefully about your pension assets, whether you’ve got a money purchase pension or defined benefits pension, as the decision you make about how to take your pension benefits is interlinked with funding care in later life. Consider if taking out an immediate care fees annuity could be relevant or helpful to you, (this is where you get guaranteed income for the rest of your life, for giving up some money), and how that that fits in with the rest of your assets.
- A good SOLLA (Society of Later Life Advisers) accredited independent financial adviser can help you to think and plan about these things, when you come to needing care. However, we strongly recommend approaching this as part of your own comprehensive planning before you need care.
If you’ve enjoyed this episode, and it’s been useful, please do rate and review us, so that more people can find us. You can listen and subscribe to agespace money on iTunes, or wherever you get your podcasts, by clicking on the ‘subscribe’ button. You can find lots more information about some of the issues we’ve talked about, and all the things we do, at agespace.org.uk. There are more additions of the agespace money podcast about equity release; legal powers of attorney; making wills; and getting yourself financially organised.