What do you need to be aware of as you or a family member prepares to go into care? What value can a financial adviser add to this process?
In our recent webinar, Clive Barwell, an independent financial adviser at Wren Sterling and accredited by the Society of Later Life Advisers (SOLLA), talked through the issues in the sector, what people need to be aware of as they or a family member prepares to go into care and the value of a financial adviser in the process.
This article is a summary of the main points around the different types of care, and the preparation needed before a family member goes into care. After all, the UK population is getting older, quickly, and that’s going to mean more pressure on already stretched care services.
There are over half a million people aged 90 and over in the UK. 70 per cent of these are women. Between 92,000 and 142,500 people in England each year have an unmet need for palliative care. Yet in real terms, spending on social care in England has fallen by £770 million since 2010.1
Why are we talking about care costs?
The short answer is that the UK is facing a huge strain on its care services in the coming years – if they’re not already feeling it.
The UK population is growing and causing the care sector to grow at rapid rates. The number of adult social care jobs in England as at 2015 was estimated at 1.55 million – an increase of 12,500 jobs since 2014.2 But is that enough to care for this rapidly growing section of the population?
Between 2005/06 and 2015/16 the total number of people aged 65 or over in England increased by close to 21 per cent, representing nearly 1.7 million extra people.3
Moreover, the greatest growth in percentage terms has been amongst those aged 85 and over, this age group increased by 31.3 per cent (or more than 300,000 people) over the period.3 We could be facing a crisis in the next few years, so preparation is key for those wanting to receive quality care.
Who pays for your care?
The NHS pays for all aspects of medical care, and this is free at the point of delivery. For those unsure about who pays, it’s important to know that there are three types of care; social, registered nursing, NHS continuing healthcare.
This type of care includes daily living assistance – getting up, going to the bathroom, showering, dressing, feeding, etc. These are all daily living activities, and any care of this kind will need to be paid by the individual. If they do not have sufficient income, then the local authority will pay this, assuming the individual is assessed as having “Eligible Care Needs”. Their medication and the occasional visit from a nurse will be paid by the NHS. The local authority will only pay £400-600 a week for a care home – and you have to consider do you want to be able to choose the home your loved ones will be placed in?
When an individual needs more help than can be provided by a GP and a visiting nurse, the social care aspects continue to be means tested if they have the income. The NHS will then pay for the nursing provision. In England that’s currently £155.05 per week. So, if the cost of the care home or nursing home is £655.05 a week, then the NHS pays the £155.05, and the individual pays the £500 – or if they’ve run out of money, the local authority will top-up their income to cover that.
NHS continuing healthcare
When the balance between social care and medical needs changes to where the medical needs outweigh the social care needs the NHS picks-up the entire bill. There are a number of situations where arguments can break out about where the line occurs between social care and NHS continuing healthcare. Sometimes this will take place after death using their medical records.
The means test
The means test will look at the individual’s regular income (pensions, benefits and earnings) and capital (savings, investments and property). For example, in England if you have more than £23,250 then your capital is deemed to create sufficient income – on top of your pension and other income – to cover all of your social care costs. The chart below shows the regional variations in the means test for 2017/18.
* The £78 benefit is only payable for those who require Nursing Care.4
** The above rates are the DWP rates applicable 2017/18, and have been taken from each of Age UK’s regional websites
Other than in Wales where the upper and lower limit are the same. In England, Scotland and Northern Ireland, we have to take the lower capital threshold into account. In these areas, £1 per week per £250 over the lower threshold is added to other income to assess affordability. The reality is that even when you reach £23,250 the capital erodes pretty quickly down to that lower threshold. Once this reaches that lower threshold then the capital is no longer taken into account.
When should you start planning for your care?
There is no golden rule for when you should start planning for your own care, but I do talk to clients about this at the point of their retirement so that when we’re looking at deployment of assets we can discuss this. But remember, the local authority is never going to criticise you for having enjoyed your retirement if you end up needing payment for care – but you should consider if you want to have a say in your care.
The value of a financial adviser
I sit down with clients and talk through various scenarios long before they need care. As a qualified independent financial adviser – who holds the required regulatory qualification for advising on long term care – I am able to provide an holistic review of an individual’s financial situation. This also means that my clients can include the whole family into any decision. And of course there are regulated investment products which only specialist financial advisers can advise on.