What are my social care options?
After reading about social care reforms, I’ve realised I have very little knowledge of the products and options available. Can you provide an overview please?
Tom Selby, AJ Bell Head of Retirement Policy says:
There aren’t a huge number of specific solutions available for those who self-fund their long term care in the UK, in part because costs are uncapped and difficult to insure against.
News of a care cost cap set at £86,000 will have in part been driven by a hope that an insurance market will blossom as a result.
This cap – details of which we’re still awaiting – will almost certainly just cover personal care costs, rather than things like accommodation and food.
Depending on your circumstances, you might qualify for funding from the NHS or your local council following health and financial assessments. However, any amount you receive will often not be enough to completely cover your care costs either at home or in a care home.
It’s important to remember that your property won’t usually count towards the social care means-test if you or your partner are still living there. This is also the case if you move into a care home, but your partner or another dependent continue to live in your own home. So despite lots of the focus being on people having to sell their homes to pay for care, in many cases this will not be necessary.
Even if you have to pay for care, you might be entitled to claim certain benefits which are not means tested. For example:
– Attendance Allowance (for those over State Pension age);
– Personal Independence Payment (if you are under State Pension age).
An immediate needs annuity is one option. This is an insurance product that will pay you a guaranteed income for the rest of your life to cover care costs in exchange for a lump sum up front. The income is tax-free if paid direct to a registered care provider.
If you go down this route, make sure you shop around. You can find an accredited specialist via the Society for Late Life Advisers (SOLLA).
Equity release plans allow people to release money tied up in their property to fund care costs. Anyone considering this route should carefully read the terms of any deal they are offered.
One of the major risks is that interest is usually added to your overall debt, meaning the amount you owe overall can potentially spiral if left unchecked. However if you use a provider that is a member of the Equity Release Council they do at least have to give a no-negative-equity guarantee. Releasing equity from your home may also affect your ability to access means-tested care support from the state.
This is a complicated area so I would strongly suggest anyone going down either route gets specialist independent advice first.
Many people will also use existing assets – such as money saved in pensions and ISAs – to help fund their care costs.
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