A-Z

Paying for social care (older people)

Ways to pay for care

This page covers;
• Using allowances and pensions
• Buying a guaranteed income for life to pay for care
• Options for using the value of property

Paying for social care in older age can be costly and people are often surprised to find they must pay much of the cost themselves. People who pay for care are often referred to as ‘self-funders’. Care often starts off as casual, unpaid family help with occasional paid-for care. As people need more care at home or move into a care home, the weekly costs can become very high and even those with comfortable savings worry about the future costs of care.

 

Sinclair describes how he feels about paying for care.

Sinclair describes how he feels about paying for care.

Age at interview: 92
Sex: Male
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I accept the inevitability of it, but there is a, it seems to me there is a dreadful unfairness in that we have been prudent over the years and I suppose at one time if you take our total estate you might say that we’re modestly rich this, our two fees together is £2,500 a month even if you’re modestly rich it runs down at quite a speed, yeah, yeah.

People pay for social care in different ways - from pensions, savings and investments; selling or renting out their property as well as using benefits such as Attendance Allowance.

 

Jane’s mother used income from various places to pay for her care home.

Jane’s mother used income from various places to pay for her care home.

Age at interview: 60
Sex: Female
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The income, her income streams, which was her own, her own state pension and an occupational pension of my father’s so it was a widow’s pension, and she also had attendance allowance. So they were her three forms of income and then details of her investments at the time.

Attendance Allowance

Attendance Allowance is a benefit for people who need help with everyday activities because they are physically or mentally disabled and over state pension age. There is a lower and higher rate of Attendance Allowance. It is not means-tested so everyone who has care needs that meet the conditions will receive this benefit. Applications for Attendance Allowance should be sent to the Department for Work and Pensions (DWP) on the relevant claim form. See more about Attendance Allowance in Benefits and other help with funding care.

Pensions

Some people cover the cost of their care with their pension income although people told us they had to dip into savings as their care needs increased. Some couples said their pensions were very different, often the woman’s pension was smaller than her husband’s. This can affect how they share the costs of care.

 

Lynne explains that her father had a good pension income but her mother’s pension was much smaller.

Lynne explains that her father had a good pension income but her mother’s pension was much smaller.

Age at interview: 65
Sex: Female
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And also the fact that like my father has a very good pension plus the government pension, plus attendance allowance, and my mum has private pension but it’s tiny compared to my father’s her government pension is less than my father gets, her attendance allowance is the same. But her care fees are exactly the same so there’s a huge imbalance of how much you need for each person.

 

When her husband moved to a care home, Margaret was allowed a portion of his pension.

When her husband moved to a care home, Margaret was allowed a portion of his pension.

Age at interview: 79
Sex: Female
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The only thing for me was, the worry was about how I was going to [laughs] how I was going to live but out of that out of the, when the financial assessment was done by Social Services, out of that it did come that I was going to, because of his pension I was going to, because I never worked full-time, apart from the short few years in my life I worked sort of, I don’t know, when the children were small I work [laughs] I didn’t work, I don’t, not very much, and then I gradually, but I never got to full-time again just because I wasn’t, there weren’t the hours available. So I suppose from my point of view I had, we relied on Joe’s pension more than, than mine so, but what came out of that was that I was going to get about £200 a month, which is not much money [laughs] but it was, I was going to be allowed that from Joe’s pension which hadn’t, I, that was a great relief to me that I hadn’t picked up that really in any of the documents that I’d read so I was very pleased about that.

Buying a guaranteed income for life to pay the costs of care (an Immediate Needs Annuity)

Many people do not know that there are financial products that guarantee an income for life to pay for care costs. These products are called immediate needs annuities or immediate need care fee payment plans. The person needing care pays an upfront lump sum for a policy that pays for care until the end of their life. The cost depends on a person’s age, health and medical history. It is called an ‘immediate needs’ annuity because it is only available for people who already have care needs. They can be tax free. It is essential to talk to a registered later life adviser before buying one of these policies. For more about this, see What is an immediate needs annuity?. People we spoke to who bought an immediate needs annuity said they were very happy with the process and the peace of mind it gave to the family and the person receiving care. But it is not something that would be right for everyone.

 

Mark explains how he found out about immediate needs annuities.

Mark explains how he found out about immediate needs annuities.

Age at interview: 58
Sex: Male
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Yeah, we thought, you know, what if he lives to be a hundred, you know, we will have to, we don’t want to move him. So in fact the, his care home have been extremely helpful in, from the moment he moved in up until; well they’re always helpful actually. But they, when he moved in they explained all the various allowances that he was eligible for and so we did all of that, and they were quite they were very helpful in sort of talking us through the pros and cons from their point of view of a what’s it called? It is called a care, a lifetime care plan; it’s an, I think it’s an annuity is it?

 

Buying an immediate needs annuity gave Jane’s mother the reassurance she needed.

Buying an immediate needs annuity gave Jane’s mother the reassurance she needed.

Age at interview: 60
Sex: Female
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And as, peace of mind, especially for your mum?

Oh it was huge, it was huge. You, you could see that she, and I could just tell her every time, “The money will never run out, you know, it doesn’t matter if you’re here when you’re a hundred and ten” [laughs]. You, you know I mean it was never likely to happen but, you know, the, the point was that she could be assured that she would be, she was paying her own way, because that’s how she felt about it and it would have, and it would have worked. And as it happens, my friend who did the same thing for his mother, he won on the deal. So, you know, in a sense I think well there are winners and losers in, in insurance, because that’s what it is really, and I know somebody who did very well out of it and we got what we wanted. So I would recommend it but it has to be done obviously in the light of the figures and the information and the money that’s available, and it wouldn’t suit everybody, and I think if it had taken all the money then I’m not sure that I, we probably wouldn’t have done it but had we done it then I think we might have felt less sanguine about it afterwards, but because we could do it and cut the cake, so to speak, it was fine.

The value of a home or other property

The value of a person’s home will not be included in a financial assessment by the local council if the person needing care, or their husband, wife or someone else who is a dependent, continues to live there. More about this in What is a financial assessment?. But if the person needing care lives alone and then moves into a care home, they may need to think about how to use the value of their home to help pay towards care costs. It might be possible for the local council to pay the care fees as a loan which will be paid back to them when the person’s home is sold. This is called a deferred payment agreement. Not everyone is eligible for a deferred payment agreement so it is worth checking with the local council.

 

Sharon, Income Services Manager at City of York Council, talks about deferred payment.

Sharon, Income Services Manager at City of York Council, talks about deferred payment.

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And basically deferred payment is like mortgage you agree for the local authority to put a charge over your property and they will then contribute to your care or your care home and the care costs over and above your income. So, for example, you're in a care home that costs 1000 pounds and you were paying 250 pound a week from your income, the 750 pound could be offset against your property, your asset, through a deferred payment agreement.

 

Frances decided to sell the family home rather than arrange a deferred payment agreement.

Frances decided to sell the family home rather than arrange a deferred payment agreement.

Age at interview: 52
Sex: Female
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Well you’re looking at, we were looking at we were paying originally £700 a week because it was respite but the second home he went to was £1,000 a week, and he had to fund that until obviously he’d dropped below the £23,000, but he didn’t have any savings, all his savings were tied up in our house, and that was where the problem came. So they said, the council said to me that they would lend us the money; I can’t remember what they called it; deferred payments; but they would charge us interest. And so I was like, “OK, but what happens, so what happens then about paying this deferred?” And basically we could carry on with deferred payments until my dad died. So my question to them was, “If his bill ended up being £80,000,” because at the time my dad was still physically OK, “what and his value of the property was say £60,000, what would happen about that other £20,000?” And they said, “We don’t know, we’d probably come, you’d probably have to pay it,” because our monies were combined together. And at that point I was like, “No, I’ve lost my career of what I was doing, I’ve lost my home.” Because we lost, we had to sell our house quickly so we had to sell it cheaply; the same with my dad’s house, when we sold that we sold it for £30,000 less than it was valued for because it wasn’t moving. So the pair of us had lost quite a bit of money with all of this and I had reached the point of, no, enough’s, enough, I’m not losing anymore. And also my question was, and this was being, me being me; but if you jointly own a home then surely the insurances should be split between you? So my dad should still be paying half of the value of the property as in for insurance purposes, because if the house burnt down then there would be nothing left, you know? And Social Services were saying, “No, all the bills you have to fit, you have to pay everything.” And I’m like, “No, that, that’s not right, that can’t be right, because it’s hi, you know, insurance particularly, it’s in his interest and your interest for us to maintain the house and so if something needs doing then surely he should be paying half, because that would, you know, help his money at the end.” And they were adamant, no, that wasn’t right. So we put the house on the market because I was not going there, at all we put the house on the market and the week we’d signed the contracts they came back to me and said, no, I was right, there was no basically, in all fairness, I don’t think they’d come across this situation before, because most houses are jointly owned between spou, you know, couples aren’t they? Whereas this wasn’t, this was a different generation; so my dad had no financial we had no dependence on my dad financially and so, yeah, I remember sitting in the car, because they’d rang me just as I was getting out the car, to tell me that, no, we, you know, my dad could still contribute; and I’m like, “Well I’ve sold it now, it’s too late now.”

  

Parting with the family home can be worrying for people paying for care and their relatives. The people we spoke to choose different ways of dealing with this. Some left the property unoccupied for a few months so that their relative could decide about selling when they were ready. Others sold the property as soon as they could and used the money to pay care home fees. Some children of people paying for care had Lasting Power of Attorney and decided not to tell their parents about selling their home because they thought it would be too stressful.

 

Andrew and his sisters sold their mother’s house to pay towards her care home fees.

Andrew and his sisters sold their mother’s house to pay towards her care home fees.

Age at interview: 58
Sex: Male
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We had Power of Attorney so myself and one of my sisters tends to manage mum’s account. So obviously mum had started to pay from her savings; at the same time obviously we, mum had left her home, her flat that she owned here in [Town], and we put that on the market to sell that and eventually, after a few months, that sold so that topped up her savings and we’re now funding mum. Obviously when she went from residential to nursing care the fund the fees increased at that stage so that was a bit of a blow again but mum’s fees are currently met out of her savings.

 

Jacky could not tell her mother how much was being spent on care.

Jacky could not tell her mother how much was being spent on care.

Age at interview: 65
Sex: Female
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Oh yes, she was very [laughs] very financially savvy. That’s why [laughs] I mean we just lied to her about it I mean when we got to the situation she didn’t know how much it was costing and how much her savings were going down because she would have been absolutely horrified if she knew that absolutely everything had gone, the house and everything. I mean like now she still, some days she’ll sort of say, “Well haven’t I got a house to go back to?” And you have to try and smooth over it, because you can’t actually tell her the whole financial truth, she’d be so horrified.

Families have to decide how to look after quite large amounts of money after selling a home or other property. Some people decided to keep matters simple and put all the money in one bank account even though they knew they would not be getting the best returns. A few people told us they consulted financial advisers to help decide how to look after the money.

 

Bella consulted a financial adviser about investing money to pay for care.

Bella consulted a financial adviser about investing money to pay for care.

Age at interview: 69
Sex: Female
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She had a lot of pensions, she'd done a lot of investing, she had ISAs coming out of her ears, and we could make up about 80 per cent of what was needed monthly. So, ah, when we sold the house, I put it into something and took an income out of it, and that covered it for the first two or three years - four years, in fact. We then got to the point where I needed to activate her final lump sum that she had, that we'd been just reinvesting and reinvesting, so the money had grown a little bit, to try and kind of index-link it so to speak, and I'd just sent off to have that turned into income when she died.

 

Some families rented out their parents’ home and used the rent to contribute towards care home fees. However, others said that renting seemed complicated and they just wanted the finances to be as simple as possible so they sold the property.

 

Simon did not want to sell his father’s house so he arranged to rent it out as a holiday let.

Simon did not want to sell his father’s house so he arranged to rent it out as a holiday let.

Age at interview: 60
Sex: Male
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You’re not really planning to sell your father’s house any time soon?

No. I don’t want to. He, he says, “Why don’t we just sell the house?” And so, and I’ve said to him, “Look, well, I’ve set up a business now.” So there’s a partnership, me and my dad that administer that house as a holiday let. So with his permission last year I did some work on the house, the first work that’s been done in forty years, to get it up to a standard where we could rent it. Originally I was thinking of renting it to a family and then I thought about holiday let, because then we can use it, dad could go down there; now, of course, dad can’t go down there because he can’t walk anymore. So we set up a partnership that is a, well hasn’t been going a year yet but we’ll see what happens.

That sounds like a good idea.

Yeah, a friend of mine advised me to do that; he said, “Well why don’t you let it? Because otherwise, you know, it’s just going to...”

A lot of work though, you’ve got to be on hand.

I was down for about three months getting that done, yeah.

And, and I suppose each week that it’s let out you’ve got to be sort of...

It’s been, it’s been let out as a holiday let since May last year and up till now [touching wood] it’s been pretty good, but then this virus has kicked in and we don’t know what’s going to happen now.

 

Sally decided to rent out her parents’ bungalow to pay towards care.

Sally decided to rent out her parents’ bungalow to pay towards care.

Age at interview: 66
Sex: Female
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Mum had always said that she [a] she never wanted to go into a care home and [b] she didn’t want anybody else looking at her finances; and that’s always stuck with me even when she became, you know, confused. But because, because we knew, obviously we worked out what the fees were for care at home and we worked out when they both went into care to the care home, when we, you know, we’d worked out how much the monthly fees were going to be, and then obviously the monthly fees, but of course we had got Attendance Allowance which would go towards them, and their pension would go towards it, so with those two added together that would, that was a contribution. And then when my father moved into care they had a bungalow and so we rented the bungalow out and used the rent from the bungalow to also to also put towards the fees. So with, with those contributions, the three contributions, so the pensions, Attendance Allowance and then with dad the rent from the bungalow, we worked out what the remainder was that we had to pay and so we knew from his, from their investments and their savings how many years we had actually got before we would have to think about selling the bungalow and so from that point of view we didn’t get, we didn’t need any help or any financial yeah, any financial advice at all. I mean we went, you know, we mentioned to our own financial advisor but it was just a sort of you know, is everything do you think what we’re doing is right, and they’d say, yeah, you’re absolutely spot on and that was it. But that’s probably because, especially my husband who is quite astute at all these sort of things and he was a huge help, but I do understand that if you are not aware of all the implications and the huge cost that there is and also we were fortunate in that we got the rent from the bungalow to go towards it as well so that was fine. And even though it sounds like, you know, financially it wasn’t, it wasn’t too bad we still worried like mad about what would happen if we had to sell the bungalow, you know.

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