How to Pay for Care

Council Funding and Means Testing

Council funding for care home fees is available, but it's means-tested. This means your savings, investments, and property will be assessed to determine how much (if any) support you'll receive.

The Financial Thresholds (2024)

• Under £14,250: Full council funding (you pay nothing toward accommodation)
• £14,250 - £23,250: Partial council funding (you contribute from your assets)
• Over £23,250: No council funding for accommodation costs

What Counts in the Assessment

• Savings and investments
• Shares and bonds
• Property (usually after 12 weeks in care)
• Valuable possessions
• Income from pensions and benefits

What Doesn't Count

• Personal possessions and furniture
• One car (if reasonable)
• Surrender value of life insurance policies
• Property if your partner still lives there
• Property if a relative over 60 or disabled relative lives there

Self-Funding Your Care

If your assets exceed £23,250, you'll be considered a self-funder. This means you pay the full cost of your care until your money reduces to the threshold levels.

Self-Funding Options

1. Pay from Savings and Investments

The most straightforward approach is using your existing savings, ISAs, and investment portfolios. Consider the order you withdraw from different investments to minimize tax implications.

2. Income from Pensions

Your state pension, workplace pensions, and private pensions can all contribute toward care costs. You may need to consider:

• Taking larger pension withdrawals (25% tax-free, remainder taxed as income)
• Pension income drawdown vs annuity options
• Impact on your spouse's financial security

3. Immediate Needs Annuity

These specialist products are designed specifically for care funding. You pay a lump sum and receive guaranteed monthly payments for life to cover care costs. Benefits include:

• Payments are tax-free (paid directly to care provider)
• Guaranteed for life, regardless of how long you live
• Can be cheaper than self-funding if you live longer than expected
• Different rates available based on your health conditions

Property and Housing Wealth

Your home is often your largest asset, but the rules around including it in care funding assessments are complex.

When Your Property is Disregarded

• Your spouse or partner still lives there
• A relative aged 60+ lives there
• A disabled relative lives there
• Your child under 18 lives there
• Someone who gave up their home to care for you lives there

The 12-Week Property Disregard

If none of the above apply, your property is ignored for the first 12 weeks of care. This gives families time to decide whether to:

• Sell the property to fund care
• Arrange a deferred payment scheme
• Find alternative funding arrangements

Options for Your Property

Selling Your Home

The most straightforward option, providing immediate funds for care. Consider:

• Current market conditions
• Capital gains tax implications
• Estate planning considerations
• Emotional attachment and family wishes

Equity Release

Release money from your property without selling. Options include:

• Lifetime mortgage: Loan secured against your property, repaid when property is sold
• Home reversion: Sell part of your property for a lump sum, retain right to live there

Renting Out Your Property

If you're unlikely to return home, rental income can contribute toward care costs. Consider management fees, maintenance costs, and tax implications.

Deferred Payment Schemes

If your main asset is your property, councils must offer a deferred payment agreement (DPA). This allows you to defer paying care home fees until your property is sold.

How It Works

• Council pays your care home fees initially
• You repay the money when your property is sold
• Interest is charged (usually government gilt rate plus 0.15%)
• Council may take a legal charge on your property

Eligibility

• You own property worth over £23,250
• No one with disregard rights lives in the property
• You have insufficient other assets to pay fees
• Your property is suitable for sale

Advantages and Disadvantages

Planning Ahead

The earlier you plan for potential care costs, the more options you'll have. Consider these strategies:

Care Fee Planning

• Long-term care insurance: Policies that pay out if you need care (limited availability in UK)
• Regular savings: Building a specific care fund through ISAs or pensions
• Property planning: Consider implications of property ownership structures
• Pension optimization: Maximizing pension contributions while working

What NOT to Do

Professional Support

Consider getting advice from:

• Financial advisers: Specializing in later life planning
• Solicitors: For will writing and power of attorney
• Accountants: For tax planning implications
• Care funding specialists: For immediate needs annuities and care funding advice