Guide to Long Term Care
With people living longer, many of us can look forward to 20 to 30 years or more of retirement. But the chances of being perfectly healthy and able throughout that time are, unfortunately, not so good.
The need for long term care and how it should be paid for is arguably the greatest cause for concern among our growing elderly population. Statistics show that from age 60, one in three women and one in four men will require some form of care on a long term basis(1). Almost half a million people are in long term care (residential care homes and long stay hospitals)(2)
One of the problems for the current generation of elderly people is that they were brought up to believe that the State would look after them “from cradle to grave”. Sadly this is not usually the case. Although the NHS provides free medical care in hospitals, the provision of long term care outside hospitals is now the responsibility of individual local authorities and is not free to everyone.
In England and Wales and Northern Ireland, should you need residential or nursing care, your local authority will assess your means to determine what proportion of the cost is your responsibility. If you have assets of more than £23.000 (£22,000 in Wales) you will not be entitled to any financial assistance from your local authority for long term care costs in a nursing or residential home.
If your assets are between £14,000 and £23,000 (£19,000 and £22,000 in Wales) some assistance may be given by the local authority. For those with assets of less than £14,000 (£19,000 in Wales), “free” care will be provided, but you will have to give up all your income (apart from a personal weekly spending allowance of £21.90 (£20.00 in Wales) to the local authority.
In Scotland the lower threshold is £13,000. If your capital is between £13,000 and £21,500 you will have £1.00 per week deducted fro every £250 you have over the lower limit. If your capital is over £22,000 you will have to pay for the full cost of your accommodations and personal care. There is a flat rate contribution of £149 toward the cost of personal care.
NHS Contributions for Nursing Care
If you are assessed as needing nursing care you will be eligible for the NHS Nursing Care Contribution. This is now a flat rate contribution towards the cost of your care and is paid directly to the care home. The level of payment depends on where you are in care. In England the rate is £101 per week, in Wales the rate is £114.90 per week, and in Scotland the rate is £67 per week.
Solutions
Many thousands of people have concluded that a long term care insurance plan is the most sensible and cost effective way to fund for long term care, if it were needed. A long term care insurance plan can partially or fully provide for and support your care needs, protect your assets and income whilst providing you with the security you seek in later life.
Long term care plans fall into the following three main categories:
- Immediate need schemes
- Pre-funded Long Term Care insurance
- Long Term Care Bonds
Immediate Care Annuities
These schemes are intended for individuals who need or will shortly need care. There is no time to build up funds in advance to pay for care costs and the insured route is not normally an option because of the need to be underwritten. In essence, immediate need policies use annuities to fund care costs.
Pre-funded Long Term Care Insurance
Pre-funded schemes (limited availability), as the title suggests, are arranged in advance of anticipated care needs. Premiums can be paid on a regular basis or by single contribution.
Long Term Care Bonds
Long Term Care Bonds are lump sum investments designed to pre-fund anticipated LTC needs. As pre-funded schemes, they have the attraction that they should be able to provide cover at a lower cost than the immediate need schemes.
Please note that the information above is for general guidance only and represents our understanding of current rules, regulations and Inland Revenue practice. We cannot assume legal liability for any errors or omissions it might contain.
(1) Source: Age Concern www.ace.org.uk (2)Source: Lang & Buisson 2004
For further information or to book an initial consultation, please contact:
HLS Financial Management on
01277 350560