You may be aware that you may be eligible for financial help for your care needs but with all the hassle of paperwork you find it confusing. Our experience team at Caremax have the knowledge to help you understand your entitlements and also decide the best option for you.
Due to a change in legislation many people requiring social care needs are encouraged to stay at home and chose the kind or care and support they want so that they can take control of their lives and live independently within their local community among their family and friends.
Your local authority will allocate a personal budget to you after assessing you and decide that you require assistance with your personal care and needs. The amount of money you receive will depends on your financial circumstances.
You can take your allocated fund as direct payment which means a cash payment is paid to you or someone you choose to act on your behalf. You can only use the cash to pay for those services you need yourself such as personal care, day care, employ someone you know or you can talk to us for a wide range of service for you to choose from.
You may decide not to have control of the cash but opt for your local authority to retain the money and pay for the services you need. Another option is you may decide to have part of the money where you can buy other services you may require from other providers.
This type of funding is flexible and you get to choose and decide the type of service you want for your needs and how you want it. If you require additional care and support you can use your personal savings to top it up.
Funding for your services from CareMax will give you greater control over your cash and gives you a wider choices of home care services or home services or a package that best suit your needs. This takes care of you having to look for workers and deal with all the paperwork. We take care of all the trainings required to deliver care safely and checks for criminal records as well as reference checks.
What benefits are you entitled to?
Whether you need help to live safely and comfortably in your own home, or you need to move into a care home, financial support is available. Furthermore, not all benefits are means-tested. For example, disability benefits that help with personal care needs do not take your income or savings into account.
Disability Living allowance
You can get Disability Living Allowance if you’re under 65 and have difficulty getting around or need help with things such as washing, dressing, eating and using the toilet. It’s tax free and is worth £56.75 a week if you have difficulty walking, plus £81.30 a week if you need personal care.
Personal Independence payment
Between April 2013 and October 2017, Disability Living Allowance is being replaced by Personal Independence Payment for disabled people aged 16 to 64.
Attendance Allowance is also tax free and is not usually affected by any savings or income you may have. You may be entitled if:
- You are aged 65 or over and need help with personal care because of illness or disability (this could be a physical, mental disability or learning difficulty), or
- Your disability means you need supervision to avoid putting yourself in danger (for example you need someone to help ensure you maintain a strict diet or help you take certain medications).
Attendance Allowance is based on the care you need, not the level of care you are currently receiving. So even if you don’t receive support from a carer at the moment, you may still be entitled to this benefit if you have a physical or mental disability.
You could receive £54.45 a week if you need help in the day or at night or £81.30 if you need help in the day and night.
Council Tax discounts and exemptions
You may receive a reduction on your Council Tax bill if you are disabled or suffer from a mental illness.
To find out more please have a look at the www.gov.uk website
Council Tax only applies to people living in England, Wales and Scotland. If you live in Northern Ireland, you might qualify for a reduction in your rates through the Rate Relief Scheme.
If you’re on a low income, you may also be entitled to other benefits and help with health costs.
- Use a benefit calculator on the www.gov.uk website to find out what you may be entitled to
- Check out www.turn2us.org.uk a charitable service that helps people access welfare benefits, grants and other support.
Before you get help
If you are disabled, elderly or have a long-term health condition that means you need support with day-to-day tasks, your local authority might help with some or all of the costs. Exactly how much you get will depend on your individual needs and how much you can afford.
Your local authority will decide whether you’re eligible for funding, normally the social services department. If you have savings and assets of more than £23,250 you’ll have to pay for your own care.
Before they can help, your local council must carry out an assessment of your care needs. It is called a ‘needs assessment’ or a ‘care assessment’, it is free and it is your legal right to have one. They will also carry out a financial assessment before deciding who pays for the services you might need for you care and support. This is called a ‘mean test’.
You can also assess your own care needs or complete an assessment for someone else. This sets out in your own words the care that you think you, or a person you care for, may need.
The outcome of the financial assessment is that the local authority will either:
- agree to meet the full cost of your care needs
- agree to meet some of the cost (and you’ll need to top up the rest), or
- leave you to fully fund your care
Your local authority is legally obliged to provide certain levels of assistance if you are entitled to state or part-funded care. However, there is no such legal obligation if you pay for your own care.
How does a mean test work?
Your local authority has to follow a thorough assessment process to work out your care needs and what funding it has to provide. A means test allows them to calculate how much, if anything, you should contribute to the costs of your care.
It works by assessing your financial situation, which includes:
- your regular income – such as pensions, benefits or earnings, and
- your capital – such as cash savings and investments, land and property (including overseas property), and business assets.
What happens if you are a home owner
If you own your home, it may be counted as capital if you move into a residential care or nursing home and after 12 weeks you remain there on a permanent basis. However, your home will not be counted as capital if any of the following people still live there:
- your husband, wife, partner or civil partner
- a close relative who is 60 or over, or incapacitated
- a close relative under the age of 16 who you’re legally liable to support
- your ex-husband, ex-wife, ex-civil partner or ex-partner if they are a lone parent.
Your local authority or trust might choose not to count your home as capital in other circumstances, for example if your carer lives there.
Immediate need annuity
Immediate need care fee payment plans are types of insurance designed to cover the shortfall between your income and your care plan costs for the rest of your life. The price of a care plan is based on how much income you need and the insurance company’s assessment of how long you are likely to need it for.
Provided the income from the immediate care plan is paid directly to the care provider, it is tax free.
How much you pay up front will depend on:
- The level of income you need to fund for you care needs
- Your age
- The state of your health (the poorer your health when you buy the product, the cheaper it will be)
- Current annuity rates
- Your life expectancy (the shorter that is, the cheaper the plan will be)
If you are worried about the effect of inflation, you can build that into your care plan.
For an extra cost you can also put in a special clause – known as ‘capital protection’ – that allows your family to get some of the lump sum payment back in the event of your early death.
Immediate need care fee payment plans could be suitable for you if:
- You are already in a care home, you are about to move into one, or you are receiving care at home
- You want the peace of mind of knowing that you have a regular income for life that can be used towards your care costs, whatever happens
- You have the money available to invest
- You want to cap the cost of your care, potentially safeguarding your remaining capital
Immediate need care fee payment plans are NOT for you if:
- You do not need to pay for care immediately
- You think you may only need care temporarily
- You might want your money back in the future
- There is a good chance that you would be entitled to NHS Continuing Care funding
Once you have taken out an immediate need care fee payment plan, there is no going back. So you would not be able to cancel the plan and get some of the money back if, for instance, you stopped needing care. Similarly, if you died early, there would be no way of reclaiming any of the upfront lump sum, unless you had made special provision for this.
In a nutshell, you need to weigh up having a regular, secure income to pay for care against the possible loss of capital if you were to die in the short term. Having an immediate needs annuity can offer peace of mind, but do the research to ensure it is right for you.
Make sure you seek independent advice from a specialist-care-fees adviser (Financial Adviser) before buying an immediate need care fee payment plan.
You can choose to sell your existing home and buy a smaller, less expensive one instead which could free up money to pay for your care costs.
How does downsizing compare?
Downsizing seems a much more straightforward option than some of the other self-financing options available, but there is a lot to consider.
Downsizing v equity release
Downsizing probably will not raise as much money as an equity-release scheme but it will usually be a more cost-effective option. Home reversion plans (where you sell all or a part of your house but retain the right to live in it) only ever offer a fraction of a property’s market value, whereas when you downsize you sell your property on the open market.
Downsizing v immediate need care fee payment plan
An immediate need care fee payment plan works a bit like an annuity. You pay a lump sum and are provided with guaranteed income for life to fund your care. This can give you the reassurance of knowing that you will receive a regular payment to cover the costs of your care for as long as you need it. But you might have to sell your home to buy the plan in the first place, leaving you with no property to pass on to your family. If you downsize you’ll have the smaller property to pass on in your will.
Downsizing v investments
With downsizing, you know the figures you are dealing with and exactly how much money you will have to put towards your care costs. If you were using investments to pay for your care, the return you make might rise and fall with the value of the funds and might not be sufficient to cover your care costs.
Downsizing v insurance
With insurance products, not only do you pay ‘just in case’, there is always the chance they will not cover everything you need. With downsizing, you stay in control of your funding and there are fewer complex legalities for others to deal with after you die.
Additional benefits of downsizing
Moving to a bungalow, a serviced apartment in a retirement village or into sheltered housing can bring other advantages you might not have considered.
- Your new home might be easier to maintain
- Accessibility might be easier, so you can stay in your home for longer
- A move might actually reduce the cost of your care, although modifications to the new property – such as installing a stair lift, or extending or converting a ground floor space – can be expensive,
Tips to consider before downsizing
Stamp Duty, legal fees, estate agency charges and other fees can easily run into tens of thousands of pounds, depending on the size and location of your property.
Start by working out how much your care could cost and then see how much you can put towards the cost by downsizing. Be realistic and do not be overly optimistic about how much money you can generate. Have you over-estimated the value of your property or you have not worked out the cost of the smaller property and the cost involved in moving?
You must always work out if downsizing will raise enough money to cover the cost of your care. Get proper quotes from everyone involved and most of all talk to your relatives or simply give us a call.
Equity release is a way of benefiting from the value of your home and accessing some of the money tied up in it, without having to move out. Equity-release schemes are not used exclusively to fund long-term care but because they’re designed to generate additional income, they can be used for this purpose.
There are two main types:
- lifetime mortgage arrangements, and
- home reversion plans (where part or all of the property is sold).
How do equity-release schemes work?
With a lifetime mortgage, you take out a loan secured on your home which does not need to be repaid until you die or go into long-term care.
There are three main types of lifetime mortgage.
- A roll-up mortgage. You get a lump sum or are paid a regular amount, and are charged interest which is added to the loan. This means you do not have to make any regular payments. The amount you originally borrowed, including the rolled-up interest, is normally repaid when your home is eventually sold.
- A fixed-repayment lifetime mortgage. You get a lump sum, but do not have to pay any interest. Instead, you agree a higher lump sum which you will eventually repay to the lender when the home is sold.
- An interest-paying mortgage. You get a lump sum and pay a monthly interest on the loan, which can be fixed or variable, rather than allowing the interest to roll up. The amount you originally borrowed is normally repaid when your home is eventually sold.
Home reversion plans
With a home reversion plan, you sell all or part of your home at less than its market value in return for a cash sum. You then stay on in your home as a tenant, paying little or no rent. You can often sell parts of your home over time – for example, 25% now followed by another 25% in a few years’ time.
Could an equity-release scheme be right for you?
When it comes to long-term-care planning, equity-release schemes can be useful, but only if you are looking to fund care in your own home. However, if you think you’ll soon need to move out into residential care, then equity release probably will not be suitable. That is because many equity-release arrangements have a clause that requires you to sell the property and repay the loan in full if you move permanently into a care home.
How much equity could you release?
This will depend on a number of factors, such as how much your property is worth, your outstanding mortgage, your age and the product you choose.
How much does it cost?
Make sure you are aware of all the costs before going ahead.
You may have to pay:
- an arrangement fee to the mortgage lender
- legal fees
- valuation fees
- buildings insurance
- a fee to an adviser for their advice and helping you set up the scheme, and
- early repayment charges if you end up having to repay the loan before you die or go into a care home.
These costs may add up to several hundred pounds.
Other things to be aware of
- You will need to check whether releasing equity from your home will affect your tax situation and any state or local authority benefits.
- Equity-release schemes are not flexible – they are designed as a lifelong commitment, so if you need to move home at a later date you could find yourself seriously restricted.
Always discuss your plans with your family so that it can help to manage their expectations about inheritance and avoid any disputes later.
Equity-release schemes are only one of the ways to help self-finance long-term care. Make sure you have considered all the alternatives, such as selling your property to downsize to a cheaper one or using savings to buy an annuity that will cover your care costs.
For more information please visit Using a home reversion plan to pay for your care
For clarity, the investment bonds we are talking about here are medium- to long-term investments that are designed to produce capital growth. Depending on the size of your investment, the returns could also be used to provide a regular income to pay for care fees.
They are not to be confused with other investments that have ‘bond’ in their name, such as guaranteed bonds, offshore bonds or corporate bonds.
Investment bonds may be suitable for you if you:
- Can treat them as medium to long-term investments
- Will not need access to the cash
- Are prepared to accept a degree of risk
Investment bonds will not be suitable for you if you:
- Will be totally reliant on them to fund your care
- Cannot afford to risk losing any of your capital
- Might need to get your hands on your money early
How do investment bonds work?
You pay a lump sum, perhaps from the sale of your house or savings, to a life insurance company. They invest the money for you, usually in a range of funds, until you either cash the bond in or die.
Although investment bonds are primarily designed for capital growth and long-term returns, it may be possible to use them to help fund your care. The bond also includes a small amount of life insurance, and on death will pay out slightly more than the value of the fund.
Do investment bonds affect your means test calculations?
When your local authority carries out a means test to work how much you will pay towards your care, money tied up in investment bonds will normally be excluded from their calculations. However, you cannot just put your money into bonds to avoid paying – your council will see this as ‘deliberate deprivation of assets’ and take their value into account.
For more information please download a factsheet about deprivation of assets and the means test on the AgeUK website (PDF)
What are the pros and cons of investment bonds?
- Over time, the return on your investment can be higher than with a cash savings account – always compare interest rates before deciding
- Although they carry some risk, investment bonds are considered safer than many other investment options
- If you can hold onto your capital and only use the returns, investment bonds can generate the money needed to pay for care, and leave a lump sum to pass on to your children
- Although money made through investment bonds is taxable, you can normally withdraw up to 5% of the original investment amount each year without any immediate Income Tax liability
- You can avoid putting all your eggs in one basket and potentially reduce the ups and downs of the stock market by investing in a range of funds
- You can usually switch between funds free of charge, although you may start to be charged if you keep switching funds frequently
- You will normally need to tie up your money for at least five years and might incur big penalties if you cash in your bond early. If you can’t tie up the money for this length of time, you may be better off putting your money into an ISA
- The returns from investment bonds are not always guaranteed and may not cover the cost of your care. Make sure you fully understand the terms of the bonds before investing
- Investment bonds are subject to a range of different charges – everything from initial and annual charges to cash-in charges if you withdraw some or all of your money early
- Although the tax benefits appear attractive at first, investment bonds are probably better described as ‘tax deferred’ rather than ‘tax free’. When you cash them in, the withdrawals are added to any profit made by the bonds and are taxed as income for that tax year
As with any investment, the value of investment bonds can fall as well as rise. You might make more than you would from a savings account, but you could also lose some of your money.
Some investment bonds guarantee that you will not get back less than you originally invested, but this type of bond will cost you more in charges.