In recent weeks there has been a lot of talk about the “social care” crisis in the UK. The government have delayed their announcement of plans for reform, which are urgently needed to tackle the challenges of an aging population and a system that is generally considered inadequate.
While no one wants to plan for how they might spend their later years, considering the potential cost of care is essential. Care Home report that, in April 2021, the average weekly cost of a residential care home was £704. The average weekly cost of a nursing home was even higher, at £888.
It’s perhaps no surprise, therefore, that homeowners are realistic about the possibility of using the value in their home to pay for later-life care. Read on to find out more.
2 in 5 people expect to sell their home to fund their social care
As Napoleon once said: “Riches do not consist in the possession of treasures, but in the use made of them.” A new survey has revealed that homeowners intend to use the “treasure” of their property if they need care in later life.
More than 2 in 5 (42%) homeowners aged over 45 expect to sell their property to cover the costs of care, while half accept the principle of using some or all of their property wealth to fund these costs.
While the prime minister has said that it is his job to protect people “from the fear of having to sell your home to pay for the costs of care” many people pragmatically expect to use the value built up in their home to meet the costs of a nurse or residential care.
However, a significant majority don’t believe that they should have to sell their home to fund care. The research found that 44% of over-45s thought the value of their home should be protected from care costs.
London and south-east homeowners can fund three times the amount of care of those in the north
Of course, the idea of selling your home to pay for later-life care also depends on whereabouts in the UK you live.
A new report has compared the average house price in each region of the UK against the average cost of care and shows wide regional disparities in the number of years care property values could cover.
If you own a property in London or the south-east, selling it is likely to result in you being able to afford up to 12 years of residential care, whereas those in the north-east may be able to pay for just under four years of care. The England average is around 7.5 years.
Paying for the costs of social care is the government’s nightmare
The cost of funding social care is one of the main sticking points for the government. One suggestion is to increase National Insurance contributions (NICs) by 1% and to ring-fence this money for social care.
However, critics say that this would place the financial burden on younger and lower-paid workers.
Helen Miller, a tax expert from the Institute for Fiscal Studies thinktank, says: “If the government increases the rates of National Insurance using the current structure you get all the quirks. NICs are not paid by people working above the State Pension Age and they are not paid on pension income,” Miller said.
Other suggestions have included:
- A Japan-style scheme where people contribute to their future social care costs when they reach the age of 40.
- A proposal from the Resolution Foundation, which suggests a 4% flat rate tax on all incomes, including capital gains, over £12,500 offset by a 3% cut in employee NICs. This ensures any employee earning £19,500 would be better off.
The lack of specific government policy is also preventing many people from making plans for later life. According to the same research, more than half (54%) of respondents said that they intend to delay making financial plans for care until a new policy is introduced.
Understanding the issues can help you to plan
Many people only become aware of the rules concerning the funding of social care when the issues become relevant to them.
Funding rules vary between different parts of the UK. In England, the local council will meet the full cost of care for those with savings and assets of less than £14,250. Those with more than £23,250 are expected to meet their own costs in full. Between the two thresholds, the cost is split.
The value of your home is generally included in the means test but is disregarded in the financial assessment in some circumstances. This may be because the care is being received at home or it is the home of a spouse or dependent.
Considering that you will typically be expected to pay for the cost of your care if you have more than £23,250, it’s vital that you start planning for how you might afford care in later life. With Care Home stating that the monthly average cost of receiving nursing care in a care home costs an average of £3,552, ensuring you have the means to pay for this – from your property or elsewhere – is key.
Get in touch
If you’d like advice on planning for your later life, please get in touch. Email firstname.lastname@example.org or contact your adviser on 020 3828 8100.