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Your Money > Personal Finance Articles > How will you...
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By Naomi Caine
Caring for the elderly is a sensitive topic - even more so when you introduce the thorny issue of cost. And it is not just those of advanced years and failing health who need to give the matter some thought. But what about State help, you might ask. Surely there must be some contribution towards the cost in the form of grants or benefits? The answer is that the funding rules are bewilderingly complex and, for most people, the money obtained wholly inadequate. The majority of people in care homes pay their own way or stump up a significant proportion of the bill. Or they rely on relatives to help them out. When you consider that a nursing home can charge upwards of £20,000 a year, it is easy to see the scale of the problem. And as people are generally living longer, but not always in good health, demand for such facilities is increasing, which is helping to stoke fees inflation. The Government wants to reform the system, but we await any concrete proposals. And any overhaul would inevitably be drawn out due to the size and delicacy of the topic, making it vulnerable to the political disruption that will accompany the next General Election. The one positive measure on the horizon is the introduction next April of a ranking system whereby care homes will be given star ratings, making it easier for people to judge what is on offer. Anna Pearson at Help the Aged says: "There is a disparity between those older people who can afford to pay for their own care, and those whose care is funded by the State. Care home owners receive more money from self-funders, who are inadvertently subsidising those funded by the state. Families and charities are often having to make up funding shortfalls of up to £100 a week for older people's care." The central plank of the funding regime, which is administered by local authorities, is that a contribution will only be forthcoming if the elderly person's assets are less than £21,000 in England and Northern Ireland, £21,500 in Wales and £20,000 in Scotland. And "assets" includes property, so anyone owning a home is unlikely to get anything. This leads to people having to sell-up to pay their fees. Even if you satisfy the means test and qualify for funding there is still an assessment process, with the amounts eventually paid out varying from place to place. The scope for dispute and disappointment is vast. And even if the authority agrees to pay the full fees, the recipient has to sacrifice all their income - pensions, bank interest, dividends, the lot - in return for £19.60 a week spending money. Other benefits may kick in when health deteriorates, including the attendance allowance (£41.65 - £62.25 a week) and the Registered Nursing Care Contribution (£40 - £133 for those who are very ill). Any kind of income is welcome if you are obliged to pay the full amount because you failed the means test. So what action can you take in advance to provide the money when you need it? The financial services industry has a limited range of offerings, mainly because it can't persuade people to start planning for care fees at an early enough age. Most of us have plenty of calls on our money while we are fit and well without having to fund what is known as a long term care insurance policy. The most constructive solution on offer for someone about to enter care who has to pay for themselves is an immediate needs annuity. Here, you give a lump sum, perhaps generated by the sale of a property, to an insurer, which promises to pay you an income for the rest of your life. Pay in enough and you have the peace of mind of knowing your fees are covered for as long as is necessary. But a man aged 70 would have to pay in £100,000 to get around £10,700 a year, and only if his health was failing. A woman of the same age with similar health would get £1,000 less (annuity rates for women are lower because they tend to live longer). You pay more for your annuity if you want the income to rise in line with inflation. The other problem is that, if you die the day after taking out an annuity, the insurance company keeps the lot. That's the price of the guaranteed payment for life if you live to be the oldest resident your care home has ever seen. Financial advice is worth seeking concerning how to manage a person's assets - especially important if that person is married and living in a family home, or they have dreams of leaving the property to their children - and how to negotiate the labyrinthine rules for obtaining local authority assistance. The best bet is to consult a financial adviser who has the CF8 qualification, which measures knowledge of the subject. An adviser will discuss issues such as drawing up a Will and, where a couple is involved, splitting bank accounts and even the terms of ownership of the property so that, when an assessment is made, joint assets aren't available to be taken into account. Useful links: Help the Aged: www.helptheaged.org.uk Age Concern: www.ageconcern.co.uk Saga: www.saga.co.uk |
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