Self-Funding Care

How will I know if I need to self-fund my care?

• You have capital worth over £23,250
• You own a property (this only applies to those moving into a care home)
• Your weekly income is higher than the cost of your care that you require
• You want to enhance your level of care

For families who are required to fund the cost of their care, there are options as to how they can cover the cost of care over the longer term.

Care fees annuity

A care fees or immediate needs annuity is a type of insurance policy also known as a ‘care fees plan’. An individual will be assessed to understand their health and care needs now with a projected outcome for what is required in the future. Following an assessment, a fee is payable based on the outcome of the assessment with a view to covering weekly care fees, whether in a residential care home or through a live-in care service for as long as it is needed.

A care fees plan can be purchased as soon as the need for care provision arises and, as the name suggests, benefits the recipient immediately. If the income from an immediate needs annuity is paid directly to you or your loved one’s registered care provider, it is tax exempt under current HMRC policy. The annuity can also be index-linked in order to protect against the effects of fluctuating inflation.

How much to pay upfront for immediate needs annuity

The payment required to pay your insurance company will depend on several factors:

• Your age
• Current annuity rates
• How much on an income you have
• Whether your income can stay the same or may need to increase
• Your health and life expectancy

Advantages of a care fees annuity

• Peace of mind that a payment will be paid for life towards your care costs
• Currently there is no tax to pay on the payments if they are paid to a UK registered care provider
• Reserving a portion of your wealth so that you can protect your remaining assets
• Flexibility around who the payment is paid to if you change care providers or no longer need care

Disadvantages of a care fees annuity

• You or your loved one could get back less than what has been paid in
• If you or your loved one no longer requires care, or become eligible for NHS funding, it might not be possible to cancel the annuity
• Receiving payments from a care needs annuity may affect your ability to claim for means-tested state benefits

Equity release to finance care

Equity release schemes enable homeowners aged 55 years or older to access capital from their property without having to move house or sell their home. Equity release provides either a tax-free cash lump sum or the opportunity to draw down smaller amounts of money against the value of the property.
This enables you to use the value of your house to pay for your care fees, or to purchase a care fees annuity. Therefore you do not have to sell your house and you can receive live-in care in your own home.

How much you can release depends on several factors such as:

• Age
• Health
• Lifestyle
• The type of equity release plan you choose
• How much your home is worth