Long Term Care
Long term care in a care home is very expensive, and can destroy your savings (including the equity in your property).
It's a complex area, but if you are a home owner, with savings, and a reasonable pension, then if you (or your partner) need care (at home or in a care home) then it is likely that you will incur significant costs, whilst not getting much, if any, help from the State until your savings have been reduced.
- Residential care costs vary a lot, but basic care (infirm, but otherwise OK) starts at around £300+ pw, rising as more medical and nursing needs arise.
- If you reside in England and Wales and have over £23,250 (tax year 2013/14) in capital assets, or £24,750 if you live in Scotland, you are not entitled to help.
- If you live alone then your house is taken into account and you would be expected to sell and pay for your care.
- If you have a partner (spouse or civil partnership) then seek advice.
Long term care is a type of insurance designed to provide funds should the person need to go into a care centre, typically as a result of old age and its associated problems.
If you are retired, approaching retirement, or would consider yourself to have a potential financial responsibility for an elderly relative, you should talk to your financial adviser about long term care and the options open to you.
There are also product options for those entering care, or who expect to do so.
Immediate Care Products
They are attractive because the problem faced by the individual is that if they live a long time in care, they could exhaust their resources.
The insurance company however can play the averages - and as long as those who live a long time are roughly balanced by those who go downhill fast, they can provide peace of mind to those going into care.
These packages are not cheap, and are a last resort, whose main practical purpose is for couples, to protect the surviving partner from financial worries.
A couple live in a house, which they own. They have modest pensions and perhaps £20,000 in investments. It becomes clear that one of them will need to go into care, but it is also clear that they may live for several years after doing so. The savings would soon be gone. To afford a nice care home, the house is sold and soon those savings start to get eaten. The surviving partner could easily spend a lot of their money looking after their partner.
An immediate care product allows for an alternative process.
The house is sold. Some of the money is used to buy the care package, and the rest is divided between savings and the purchase of a replacement home for the survivor - typically a flat. This means that the survivor can face the future on a financially even keel, without worrying about care fees.