The Problem
The Facts:
- Over the next 50 years, the number of people 65-84 is expected to increase by 41% (an additional 3.31 million).
- One in 5 people over 70 receive care in the home, 20% require continuous care.
- Currently 750,000 people in the UK suffer from dementia, this is expected to rise to 1.5million by 2050.
- It is estimated there are around 420,000 adults in residential care.
- There are 18581 residential homes and 442,000 places for other people and younger adults (age 18-65)
source CCSI registration database 13.3.2007
The financial implications
|
Average Annual Cost |
Average Weekly Cost |
Private nursing care |
£30,000 |
£574 |
Residential Care |
£23,140 |
£445 |
Residential Care with Dementia |
£24,700 |
£474 |
Source – Partnership Assurance
Things you should know
The National Health Service (NHS) provides care through Primary Care Trusts (PCT). PCTs are responsible for funding or arranging NHS services for the needs of the community (i.e. Doctors, dentists, hospitals etc).
There are two types of care: -
Health Care, where services are based on medical need. These should be provided free by the NHS.
Social Care, is non-medical care provided by the local authority / social services (i.e. Home help, Meals on Wheels equipment) Local Authorities are obliged to assess an individuals care needs if requested and where care needs and financial circumstances are met, the local authority can charge a reasonable amount.
The single assessment process (SAP) is a service undertaken by social services or NHS to
- Assess an individuals needs
- Assess whether they meet eligibility criteria
- Undertake a financial assessment
- Arrange an appropriate care package
The NHS is responsible for meeting the cost of care provided by registered nurses to self funding residents in Care Homes. There are three levels of payment for registered nursing care contribution (RNCC).
Low Need - £40 per week requiring minimal care
Medium Need - £87 per week – needing at least daily intervention from a registered nurse
High Need - £139 per week – needing frequent imput throughout a 24 hour period.
An assessment needs to be taken which is reviewed after three months and then annually.
The Local Authority financial assessment for care is made through the Charging for Residential Accommodation Guidelines ( crag). This assessment takes into account:
- Capital Limits – Where capital held is over £21,500 the individual is expected to meet the costs in full. Capital can include cash, savings, overseas property, land and buildings and business assets.
- Jointly held capital i.e. joint bank accounts
- Trusts – where the individual has absolute rights to capital and income their assets will be included. Where the trustees have a discretion account can only be made of payments received.
- Income – Income can be fully taken into account, partially disregarded or fully disregarded depending on the type of income received and the financial position of the individual.
Deliberate Deprivation of Assets - is the term used when someone gives away assets, sells them at less than market value, in order to increase financial support from the local authority. If capital is transferred within 6 months of receiving care the local authority has powers to recover the assets from the recipient and/or count as national capital.
If the capital is disposed of more than 6 months of receiving care, the local authority can still treat the gift as national capital.
Long Term Care and The Family Home
Importantly individuals will not be forced to sell their property to pay for care fees
Property will be disregarded as capital
-
For the first 12 weeks of residential care individuals are not charged. So if there is a difference between the local authorities standard charge and the care home the costs will be met by the local authority.
-
The value of a person’s home will be disregarded if care is expected to be temporary.
-
Where the property is the main asset of an estranged or divorced partner
-
If the spouse still occupies the property
-
Where a relative over the age of 60 still lives in the property.
After the 12 week deferred period, and assuming points 2 to 5 above do not apply the individual can apply for a deferred payment agreement. This is the difference between what they have to pay and what the local authority will actually pay. The local authority, who are not obliged to offer this facility, will place a legal charge on the property. Local authorities can offer loans to people who do not want to sell their homes immediately, to fund until the house is sold or they leave residential care.
Deferred contributions are normally paid within 56 days after death or termination of the agreement.
The local authority can ask individuals to pay fro up front costs involved and will insist the property is maintained and insured.
Ways of funding the costs of care
There are a number of ways to fund LTC.
- Pre funded LTC insurance
- LTC Bonds
- An immediate needs annuity
- Lifetime mortgages (Equity release schemes) & home reversion schemes.
Pre funded LTCI
These are stand alone policies which pay out a regular sum when the individual requires continuous care.
They are similar to life assurance policies in that a level of cover is chosen at the ouset, they do not have a surrender value, and premiums can be either paid on a regular basis or by a single contribution.
They differ from life policies in that monthly benefit are paid out on a regular basis to the care provider thus avoiding any tax liability on the individual.
They can be either convertible policies or deferred care plans. Convertible plans are plans which include an option to convert some of the benefit into LTC benefit or an income on disability that could fund continuous care.
Deferred plans or funds only start after a deferred period has elapsed. This means the initial costs are reduced and it gives peace of mind if an individual lives beyond a self-funding age.
Long Term Care Bonds
These are lump sum investments designed to prefund LTC needs. They may be surrendered at any time and acquire a cash in value.
Immediate needs annuity
These products are geared to individuals who need or shortly need care. There is no time to build up funds in advance. A lump sum is used to buy an income for life with complete security and peace of mind.
They are usually impaired annuities where the benefits are paid to the chose care provider for the rest of your life which once again means there is no tax liability on the receipts.
Benefits are generally paid out on tan individuals in ability to perform a number of Act ivies of Daily Living (ADLs). ADLs are washing, dressing, mobility, transfer, feeding or toileting.
Lifetime Mortgages (Equity Release )
Lifetime mortgages can be used for either Inheritance Tax mitigation or in LTC planning strategies.
Benefits can be taken either as a lump sum (when an immediate needs annuity ca be purchased) or on a monthly drawdown basis. Additional income from Equity release schemes may impact on means tested State Benefits such as pension credits or they may affect age allowances for individuals over 65. The advantages and disadvantages of these types of schemes are described in the Equity Release section of this website.
Frequently Asked Questions - here are a number of questions that immediately spring to mind
