Who pays for Long-Term Care?

June 27, 2024

As our life expectancy extends, the question, ‘Will I need to pay for my long-term care if I become incapacitated?’ becomes increasingly relevant as we grow older. In this article, I will explore the current associated costs, who bears these costs, and how planning your finances ahead of time with expert financial advice can help to mitigate the financial burden for you.

The Cost of Long-Term Care

Social Care can be broken down into two main categories:

• ‘Short-term Care’ is a care package that is time limited, with the intention of maximising independence and eliminating the need for ongoing support.
• ‘Long-term Care’ is about providing support services to individuals who are older, those living with a disability, or physical or mental illness on an ongoing basis.

Services range from basic community support, to high-intensity services like nursing care, often coordinated by professional financial planners. Social care can be provided in people’s own homes (known as ‘domiciliary care’), day centres, or provided in care homes or nursing homes (known as ‘residential care’).

This wide range of support services is designed to cater for varying needs but makes it very difficult to predict an individual’s requirements and prepare for the right level of cost.

According to Age UK1, the average cost of residential care is approximately £800 per week, rising to £1,078 per week for those requiring nursing care. However, these figures vary significantly depending on the location and the level of care needed – we have experienced some clients facing residential costs as high as £2,200 per week. The Department of Health and Social Care2 published an impact assessment in January 2022, estimating that 1 in 7 individuals over the age of 65 will face lifetime care costs above £100,000 and roughly 1 in 10 individuals will face lifetime care costs above £120,000.

According to NHS England2, 835,335 people received council-arranged long-term social care in one of these settings during the 2022-23 year, up 2.1% on 2021-22. As a percentage of the overall population in England this only equates to circa 1.5%.

Who pays for care?

If you are someone who develops significant health problems and therefore need support, the NHS may cover the full cost of care through the Continuing Healthcare programme, or the Nursing Care component of Nursing Home fees under the NHS Funded Nursing Care programme. However, these are subject to strict eligibility criteria.

The local authority will arrange a Financial Assessment (means test) for those requiring social care. In England and Northern Ireland, the council generally helps to pay for care costs if you have savings less than £23,250 (from October 2025, this will rise to £100,000). For Wales, this threshold is £50,000 and in Scotland it is £35,000. For those with assets valued below these capital thresholds, local authorities may cover some or all the care costs. However, support varies from council to council and depends on your own specific circumstances (such as the level of income you also receive). Individuals with eligible assets exceeding the thresholds will be expected to self-fund the cost of care.

Some local authorities also offer deferred payment agreements, enabling individuals to retain their own home and repay the local authority once their home is sold or from their estate after death.

If the local authority has determined that it will assist in funding the cost of care, they will provide a ‘personal budget’ to meet care needs. However, a more expensive home can be selected, provided that someone else (such as a family member) agrees to pay the difference in cost, known as a top-up fee.

Financial Planning

If you are unfortunate to suffer failing health then the sooner you address long-term care planning the better. Here are some of my top considerations:

• Cash Flow Forecasting – Understand your current financial situation, project future expenses in a reasoned and reasonable way and budget your finances accordingly to ensure that you maximise your ability to meet potential future care costs.
• Savings, Pensions and Investments – Historically, the average cost of privately funded social care costs has risen at a faster rate than long-term inflation. Ensuring you can continue to receive a steady pension income in later life can be useful to help cover care costs. It is also important to consider the return ‘required’ on any additional savings, to help meet the expected costs and ensure these assets are structured appropriately to meet your requirements.
• Long-Term Care Insurance – With annuity rates improving, long-term care insurance policies may help to provide a tax-efficient approach to covering care costs.
• Equity Release – For many homeowners, equity release policies can unlock a lump sum tied up in property, providing funds to pay for care without having to sell the home immediately.

Navigating the complexities of long-term care funding requires expert financial advice. Both Louise Oliver and I hold specific qualifications to provide long-term care planning advice, including retirement planning and pension advice. Long-term care in the UK presents significant financial challenges, but with effective planning, you can gain peace of mind and ensure you are well prepared for the future. If you would like to learn more, please contact us.

Sources:
¹ Ageuk.org.uk
² Department of Health & Social Care, Health and Care Act 2022 Impact Assessments for adult social care provisions,
³ NHS England Adult Social Care Activity and Finance Report, 2022-23