Paying For A Nursing Or Residential Care Home And Securing The Future

April 27, 2010 - PRLog -- In the run-up to a general election with a growing ageing population it is perhaps no surprise that how we pay for care in later life is going to grab some headlines. The situation is complicated by a growing national deficit which needs to be addressed by whichever party is asked to form the next government. At the same time we need to ensure our fragile economic recovery does not stall. Such a task would challenge even the greatest high-wire circus act. Social care funding is a problem but the real problem always comes back to the numbers.
In the UK the population aged 85 and over is set to double in number in the next 20 years and will increase by the same proportion again in the 20 years after that. It is the fastest growing sector of the demographic. Already over 16 per cent of this age group live in a care home or long stay hospital and the average cost of a private care home with nursing care, is £664 a week.
Every week, some 300,000 households receive nearly 4m hours of home help and domiciliary care at a total estimated cost of £3bn a year. The NHS spends a further £2.2bn a year on non-residential care. Whether it is care at home or in a care home, the cost is huge and despite their best intentions I think we all understand that the state is unlikely to be in a position to pay all care costs for everybody who needs care.
Nevertheless, for years the subject has been the focus of much political attention as politicians try to balance the expectations of the public and the financial reality. From the NHS and Community Care Act of 1990, through the Royal Commission of 1998 and through a whole host of other initiatives, politicians have tried to address the problem. The government’s Green Paper on the Future of Social Care Funding, published in July last year, again drew attention to the dilemma, proposing a number of options which include voluntary contributions in partnership with the state, an optional insurance model to combine with the state funding and a compulsory state insurance scheme, by way of a lump sum of between £17,000 and £20,000 payable either at retirement or on death.
Having raised the profile of social care funding, Gordon Brown’s announcement to introduce legislation during his party conference speech last September has certainly raised the stakes even further. A form of “death tax” of £20,000 has been suggested recently and subsequently dismissed.  The Personal Care at Home Bill is going through Parliament and has already been stalled by the House of Lords.
The recently launched white paper considers a number of options, including the setting up of a National Care Service but also makes it abundantly clear that if we want the state to provide more then we will all have to pay more. The National Care Service proposes a reform of the Social Care System and in the next Parliament, a commission will explore the funding of a service that can provide care free at the point of need.  It will explore the options open to people to make contributions to funding care, with the paper promising that they will be given choice and flexibility on how they contribute. A National Care Service Bill would establish in law the point at which someone becomes eligible for state support and attempt to avoid the postcode lottery.
It is proposed that the National Care Service will be implemented in 2015, people will be expected to pay for their accomodation costs. However, with 140 self funders entering residential care each day and 130,000 entering residential care in England each year, 41% or 53,000 are self funding, they need funding solutions now!  
Despite more than 14,000 responses to the consultation, we do not appear any closer to a solution. Many might argue that the proposed "partnership scheme" already exists. Currently, if you need residential nursing care and have means-testable assets in excess of £23,250 in England while you will receive no financial support from the local authority, you would still qualify for certain non-means tested benefits. If you add in the state pension then arguably even the most well-off will receive around a third of the cost of the average private nursing home weekly fee as a contribution from the state.
Whatever we think about any of these proposals, some things are becoming clear. The state is in no position to pay the accommodation costs, except for only the least well-off since residential costs constitute a sizeable proportion – at least a half - of total care home fees.
Attempts have been made to get cross-party support, although this seems to have broken down acrimoniously. There may be no agreement yet, but I would suggest it is inevitable over time.  Means-testing is going to be with us for some period yet, so anyone with assets should be encouraged to seek financial advice.
Outcome
Therefore, do we really need to wait for the election results? Surely we all know the outcome as far as future care funding is concerned - the state will never be able to pay for everybody who needs care.
Consequently, there has never been a more important or better time for people requiring care to benefit from the advice of a suitably qualified financial adviser. What provisions can be put in place?
The market has tried the pre-funded insurance route but the variables of medical science and investment return have made the risk too difficult to manage without reviewable premiums. Reviewability has the potential to create problems for those with limited assets or fixed income. Not only that, many people just do not think it will happen to them, so why insure for something you probably will not need?
So the logical time for advice is at the point that care is required. In many respects it is quite simple. Clients have some assets and capital from which they need to generate a guaranteed high level of increasing income to pay their care fees. Investments are an option but are susceptible to variable returns and can erode over time. Immediate Needs Annuities provide another solution – a guaranteed income for the rest of the individual’s life. Some cite the fact that the capital is "lost" once the annuity is purchased, but every case has the option to build in some level of premium protection – protecting a percentage of the premium in the event of early death – just as with a conventional annuity. Some think they are expensive. The average premium is about £90,000 providing a monthly benefit of, on average, £1,600 although the actual cost will vary since each individual’s health is underwritten on its own merits. There are two key benefits of this product:
1. It capitalises the ongoing cost of care so that the individual will never run out of money, no matter how long they require care.
2. Any spare capital left after the purchase of the annuity should be available for the beneficiaries of the will.
Whatever the politicians, or indeed, the electorate decide, clients deserve good advice.
Expert knowledge has always been a sought-after commodity and Case Senior Limited will direct clients to those who specialise solely in providing care fees planning advice. All of our advisers are CF8 qualified, Later Life Adviser Accreditated, through the Financial Services Skills Council and members of the Society of Later Life Advisers, (SOLLA).  Our Director, Andrew Dixson-Smith was awarded Best Long-Term Care Intermediary this year at the Health Insurance awards.
At the moment, of all those elderly people going into care and paying for their own fees only about 8 per cent get proper financial advice.
Case Senior Limited specialises in providing legal and financial support specifically for the elderly.  Our network of legal and financial professionals are all members of SFE (Solicitors For The Elderly) and SOLLA (Society of Later Life Advisers).  They are qualified to provide independent , accurate and valuable advice in a sensitive manner without pressure or time restraints.

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About Casesenior.co.uk: Our advisors are qualified in the provision of financial and legal services for the over 60’s. Our network of financial and legal professionals are all members of SOLLA (The Society Of Later Life Advisors) and SFE (Solicitors For the Elderly) and are ready to advise you on the financial and legal packages you need when moving into a care home.