Funding options for residential care for older people

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David Mance

Funding for residential care is a key consideration for older people and their families when looking into long-term care options. The cost of living in a care home can be significant, and understanding the available funding options can help alleviate stress. Below is an overview of the most common funding options:


1. Self-Funding (Private Funding)

Self-funding is when individuals pay for their residential care using their own savings, assets, or income. This option is typically for those with sufficient financial resources to cover the cost of care without relying on government assistance.

Options for Self-Funding

  • Savings and investments: Use savings or assets such as property, shares, or pension funds.
  • Pension income: Contribute to care home fees using state and private pensions.
  • Property sale: Selling a house is a common method, though it may not be suitable if a spouse or partner resides in the home.

2. Local Authority Funding (Government Assistance)

Local authorities may offer financial assistance to those unable to afford the full cost of residential care.

Means-Tested Care

  • Local authorities conduct a “means test” to assess eligibility for funding by evaluating income, savings, and assets.
  • If assets are below £23,250, individuals may qualify for financial assistance.
  • Exceptions apply if a spouse or dependent resides in the home.

Contribution to Costs

  • Even with assistance, individuals may contribute to the cost of care based on their financial means.
  • Family members may provide “top-up fees” to cover gaps between funding and care costs.

3. NHS Continuing Healthcare (UK)

NHS Continuing Healthcare (CHC) is a government program that fully funds residential care for individuals with significant health needs.

Eligibility

  • Designed for people with health-based needs rather than personal care.
  • Requires assessment by health professionals to determine eligibility.
  • Often applicable for conditions like severe dementia or intensive medical care needs.

4. Veterans’ Benefits

Veterans and their families may receive financial assistance for residential care through:

  • Veterans’ Gateway
  • War Pensions Scheme

These services can offer financial support or preferential care placements.


5. Long-Term Care Insurance

While no longer available in the UK, some individuals may have purchased long-term care insurance in the past. These policies can help cover care costs when needed.


6. Deferred Payment Agreements

In the UK, local authorities offer Deferred Payment Agreements (DPAs) for homeowners unable to pay care costs upfront.

How DPAs Work

  • The local authority covers care costs, which are repaid after the property is sold or upon the person’s passing.
  • Eligibility requires less than £23,250 in other assets (excluding the home).

Interest and Fees

  • Interest may be charged on the debt, and eventual sale of the home is required to repay costs.

7. Care Annuities

A care annuity provides a steady income for care costs in exchange for a lump sum or series of payments.

Considerations

  • Beneficial for long-term care needs.
  • Requires a significant initial payment.
  • Only covers care-related expenses.

Conclusion

Choosing how to fund residential care is a complex decision that depends on personal circumstances, the level of care required, and available resources. Exploring all funding options—whether through personal savings, government assistance, insurance, or other routes—ensures a well-informed choice. Consulting financial advisors, social workers, or healthcare professionals can simplify the process, aligning financial planning with individual care needs and preferences.