Financing Elder Care Costs
If your loved one requires elder care, you could be wondering who will have to pay their care home fees, or for their domiciliary care services?
What financial support or funding options can you expect from the local authority e.g. carers allowance, respite care, and/or personal care support? And how do you know if you're eligible to claim it?
Paying for elderly care
The cost of elder care is varied. However, to better manage your expectations:
- If your relative has enough funds e.g. if they have more than £23,250 in savings, they'll be expected to cover the cost of care themselves.
- If they have savings of £23,250 or less (this doesn't include the value of their home), their care cost will likely be covered either fully, or partly, by the local authorities.
What financial support is available to cover care costs?
Local authority funding
Depending on the financial situation of the person needing care, they may be eligible to claim funding from the local council. You/they will need to contact the social services provider in their area to find out more.
However, as mentioned above, if they have assets over £23,250 (in England), they most likely won't qualify for support.
In order to access local authority funding, your loved one will need to undergo a care needs assessment to better understand their precise needs, and therefore what funding they'll require to meet those needs.
They'll also need to undergo a means test, e.g. a financial assessment, to establish what they can contribute towards their own care costs. If they're eligible for funding, someone from the local council will put together a care plan for you.
If their financial assessment indicates they have between £14,250 and £23,250 in savings, your relative will be expected to contribute towards the cost of their care. The council will pay the outstanding balance.
If they have less than £14,250, while they won't have to pay a 'tariff' based amount towards their care costs, however they will still be expected to contribute. E.g. they must pay their pension or their state benefits towards their care costs. The council will pay the outstanding balance.
Local authority funding can be provided in three ways:
- Direct payment to the recipient to arrange paying for their own care
- The local council will arrange and pay for care
- A hybrid arrangement where the local authority arranges and pays for some care, the recipient arranges and pays the rest
Direct payments, or personal budget, are contributions from the government to help cover care costs. Unlike local authority funding which requires a care plan to access and is quite strictly controlled in how it's spent, direct payments can be used by the recipient how they see fit.
This gives them (and you) greater control over how their care needs are met. To find out if your loved one is eligible for direct payments, get in touch with their local authority. Again, eligibility will be determined by a financial means test.
If successful, recipients can expect to claim £50 to £600 per month, depending on the level of their care needs.
NHS Continuing Healthcare
If your loved one requires care outside of a hospital, the NHS Continuing Healthcare is a support package put together which includes full NHS funding for any services they may require.
These packages cover the full costs of care and residential accommodation. Eligibility will be assessed by a healthcare specialist, so to find out if your relative is eligible to access this form of care funding, they'll need to first visit their GP who will then arrange a full assessment with a multidisciplinary team of healthcare providers.
To be eligible, they'll need to have severe needs in at least two primary, priority areas. If they meet the criteria, your loved one won't have to pay anything towards their care costs.
NHS funded nursing care
This form of NHS funding pays for a registered nurse to visit your relative in their care or nursing home. The assessment process to determine eligibility is the same for NHS funded nursing care as it is for NHS continuing healthcare. Usually, this funding is only offered when someone has failed to qualify for the other one.
This funding can only be used by those residing in care homes as the care will be provided by nurses working in partnership with the home.
If eligible, NHS funded nursing care is £155.05 per week.
Benefits for care recipients
This isn't means tested, and it's designed especially for those who need assistance with daily activities, as well as mobility and medical care.
There are two rates:
- Day time assistance only - £59.70 per week
- Day and night time assistance - £89.15 per week
To claim this allowance, you/your relative will need to submit an application to the Department for Work and Pensions (DWP).
Personal independence payment (PIP)
This allowance isn't means tested either. It's designed to cover costs associated with long term health conditions and disability. It's made up of two components, each of which is paid at either the standard rate or the enhanced rate:
- Standard weekly rate - £59.70
- Enhanced weekly rate - £89.15
Again, to claim this allowance, you'll need to submit an application to the DWP.
Benefits for caregivers
If you care for a loved one for more than 35 hours per week, you're eligible to claim carer's allowance. This works out at £62.75 per week.
However, whether you're eligible to claim the full amount will depend on your personal financial situation. Also, the person you care for must be in receipt of certain benefits - PIP, attendance allowance etc.
Will family members have to pay care costs?
In a word, no. There is no legal requirement for family members to foot the bill for care costs. However, if family members would like to contribute towards costs, or would rather their family member were in a more luxurious setting, they could pay a top up fee to cover the difference.
Self funding care
If your loved one isn't eligible for local authority funding, they're going to have to self fund their care costs. Savings and pensions can be used to pay costs, or they may have an insurance policy in place to help cover fees.
Other ways to self fund care is to leverage the value of their own home by either selling their house, or to avoid selling, they can use an equity release scheme.
Using equity release to cover care costs
One popular option for paying care fees is to release equity from a property's value. Equity releases are an effective means by which a person can take money from their home, without having to sell it, or move out.
This funding option generates either additional income, or a lump sum of cash to fund care. How much money available through equity release depends on:
- The value of the property
- The outstanding mortgage
- The borrower's age
- The borrower's wellbeing
There are two types of equity release:
1. Lifetime mortgages
Lifetime mortgages are a tax free loan that is secured against the senior's house. The loan is repaid in a lump sum, including interest, at the end of the term - either when the property is sold, or the borrower passes away.
2. Home reversion
This is the process of selling the senior's property, either all or it or part of it, to a specialist provider for between 20-60% of the market value of the property. In return, the homeowner gets to stay in their home, rent free, as long as they need to. Any capital they draw down is tax free.
This article is part of myTamarin's Mental Health Awareness Week blog series looking into how employers should be supporting through critical life events. This one looks into the impact elder care can have on mental health.Read post