Funding long-term care: what are my options?

Long-term care: a definition

According to the National Institute on Aging, long-term care involves a variety of services designed to meet a person’s health or personal care needs. These services help people live as independently and safely as possible when they can no longer perform everyday activities on their own. Long-term care will differ from person to person to meet each individual’s varying requirements. For instance, care can sometimes be provided at home by family and friends, or it may need to be given in a facility such as a nursing home.

Funding long-term care: the savings threshold

If either you or a loved one requires long-term care, one of the first steps to take is getting your local authority to carry out a care needs assessment. As well as assessing what sort of care you’ll need, they will also do a financial assessment. This is to work out how much you have to pay towards to costs of care. If you meet certain criteria, you may be eligible for funding.

To be eligible, your savings (excluding the value of your property) need to be below the savings threshold. The savings threshold for local authority funding in 2019/20 is as follows:

Whether you qualify for government benefits or not, funding long-term care can be a real worry. Choosing how to pay for your long-term care can be a difficult decision to make. Whether you’re planning ahead for long-term care, or you need to find a solution urgently, it’s a good idea to speak to a specialist financial adviser. They can talk you through a number of other available options that can help you fund long-term care.

Immediate needs annuities

This type of insurance policy offers a regular, guaranteed income for life in exchange for an upfront lump sum investment. This can help pay for care costs. However, there are some things to be aware of if you decide to opt for an immediate needs annuity. Be careful not to fall foul of poor annuity rates. According to the UK Care Guide, the difference between the best and worst annuity rates could see you losing £30,000 if you had a £100,000 to buy an annuity with. Seeking specialist financial advice can help you avoid this.

Enhanced annuities

An enhanced annuity (also known as an impaired life annuity) can substantially increase your retirement income. Enhanced annuities work on the understanding that, if you have a medical condition, you’ll have a shorter life expectancy than someone in a better state of health. As a result, annuity companies pay out more to you each year than standard annuities. This is with the assumption is that they won’t have to do it for as long a period of time. It is therefore important to fully disclose health and lifestyle details when getting a quote. Some of the main conditions that qualify for an enhanced annuity include: smoking, diabetes, high blood pressure, heart disease and cancer.

Equity release schemes

Equity release refers to a range of products that allow you to access the equity tied up in your home if you are over the age of 55. You can take the money you release as a lump sum or in several smaller amounts, or as a combination of both. There are two equity release options: lifetime mortgages and home reversion. With a lifetime mortgage, you borrow a proportion of your home’s value. Interest is charged on the amount, but nothing generally has to be paid back until you die or sell your home. With a home reversion scheme, you usually sell a share of your property to the provider for less than the market value. You have the right to stay in your home for the rest of your life if you wish.

Get in touch

The team at George Square Financial Management can help you work out the best way for you to fund long-term care, which care option best suits your needs and how much money you might need for your care. Our aim is to help you make a fully informed decision about the best way to pay for care.