Unlike the NHS, social care isn’t free on demand.
If you need help with paying for long-term care, you’ll have to apply to your local authority. They’ll carry out a care needs assessment to find out what support you need. After that, a means test will see how much you have to pay towards your care. Then, depending on your circumstances, your local authority may pay all, some or none of your care costs.
So how is this decided?
The means test looks at two things. Your regular income
, such as pensions, benefits and earnings, and your capital
, such as cash savings and investments, land and property (including any overseas), and business assets.
If you own your home, it may also be included as capital, although that won’t be the case if you share it with certain people. We’ll get onto that a little later.
Following your means test, your local authority will compare your means against a set threshold. That threshold will depend on where you live in the UK.
Currently, in England, your local authority will usually help pay for care costs if you have assets and savings of less than £23,250*. Whereas in Wales, the threshold is up to £40,000*2
Additionally, the region you live in also plays a role.
If you live in an area with high house prices and employment costs, it’s likely care will cost more, so you may need to pay more than those who live in areas with lower house prices.
The value of your home could also be a contributing factor to how much you pay for care.
If you move into a full-time care home, after 12 weeks, the value of your home may be counted as capital in your means test. But if one or more of the following still live there, it won’t be.
- Your wife, husband, 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.
There are other circumstances when the local authority will not include your home as part of your capital. It’s worth contacting them to see if any apply to you. You can find your local authority here
It’s important to know there are two main types of care. Both are subject to a means test.
What is the Care Homes Means Test?
With a care home means test
(where you plan on moving into a care home), you’ll usually have to pay all the fees if your means are more than the threshold. That test usually includes your home’s value, unless one of those listed above still lives there.
If the means test shows that the local authority should pay for some of your care, they’ll usually ask you to contribute all of your income towards it, minus a small amount, which you can keep for personal expenses.
During the care at home means test
(where you plan on receiving care at home), the value of your home is not included when working out how much you need to pay for care. However, it does have the same assets and savings threshold as the care home means test.
Each local authority should publish the details of their care charges as well as how much you will be expected to contribute and how much you are allowed to keep for personal use.
You can get a rough idea of your potential care costs here
. However, on average, the cost for a place in a residential care home in the UK is £29,270 per year, with that figure rising to £39,300 if nursing is required*3
For home care, the costs for 14 hours care a week is nearly £12,500 each year*4
. For full-time home care during the day, £30,000*3
is your starting point. And if you need carers to move in around the clock, a £150,000*3
annual fee is not unheard of.
Compare that to the modest £19,900 average annual UK pension income*5
and the gap is very plain to see.
Could equity release help pay for care?
There are several options available that could help you cover the costs of care at home. Equity release
is one of them.
A lifetime mortgage
is the most popular type of equity release. Being able to release tax-free cash from your home in one lump sum or on a drawdown basis could reduce some of your care funding concerns, especially as, typically, there are no monthly repayments. With a lifetime mortgage, the loan, plus compound interest, is repaid when your plan comes to an end.
However, equity release isn’t for everyone. For example, if you’re a single applicant moving into long-term care, you won’t be eligible. But for a joint application, where only one applicant is entering long-term care, it could provide some much-needed financial support.
To find out how much tax-free cash you could release from your home, and to see if you’re eligible for equity release, use our free, no-obligation equity release calculator
We will always give you the best advice for your unique situation. And if equity release is not right for you, we will tell you.
After all, good advice is Key.
Things to consider
Our independent, specialist equity release advisers compare products from the whole of the market to find the most suitable equity release plan for you. They’ll discuss all the options available to you and explain that taking an equity release plan reduces the value of your estate and may affect any means-tested benefits you’re eligible for.
With a lifetime mortgage, you’ll still own your home. It’s a loan secured against your home and is repaid when you, or the last surviving applicant, pass away or move into long-term care.
Equity release plans we recommend have a no negative equity guarantee, which means you’ll never owe more than the value of your home.
You have to get expert advice before releasing equity; it’s a regulatory requirement. Key’s initial consultation is free with no obligation to proceed. If you decide to go ahead with an equity release plan, our advice fee – usually 1.99% of the amount released, subject to a minimum of £1,499 – is payable only on completion.