16 Jul 2021
What options are there if I’m a self-funder?
1. Pay for care with savings, shares, and pensions
2. Insurance policies such as Care annuity
3. Equity release schemes, such as lifetime mortgages services
Before you do anything, check you’re claiming all the state and other benefits you’re entitled to, some of these are not means-tested. Make sure you’ve checked out all the local authority and NHS funding options too.
If you find yourself having to fund the cost of your own long term care, knowing your options and careful planning can ensure you make an informed decision regarding your finances. There are a variety of strategies to help you pay for your long-term care. These might include family assistance, renting or borrowing options as well as drawing money from your savings.
1. Paying for care with savings, shares, and pensions
One of the common methods to pay for care is with savings, shares and pensions. For those who require additional funds, one option is a bank or building society loan. We do suggest you think very carefully about your capability to pay back a loan.
2. Paying for care with Insurance policies
A care annuity is a type of insurance policy that provides guaranteed income for life to pay for care costs in exchange for an upfront lump sum investment. An individual will be assessed to understand their health and care needs now with a projected outcome for what is required in the future.
They can also be known as:
- Immediate need care fee payment plans
- Immediate care plans
- Immediate needs annuities
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.
There are three key reasons why a care annuity is an attractive option for many individuals:
- It can be index linked so that payments rise in line with inflation
- Capital protection can be arranged in the event of early death, which allows a percentage of the upfront fee to be repaid by the annuity provider
- Making a lump sum payment, individuals reduce the value of their estate and therefore the exposure to inheritance tax
A care annuity is best based on the length of time for which care will be required. It is definitely not the best solution for those who think their care requirement may only be temporary. This is because it is not possible to cancel the plan, and get a portion of the lump sum back should care no longer be needed, due to recovery, or death.
Paying for care through equity release scheme
Equity release enableds homeowners aged 55 years or older to release some of the value of your home whilst you continue to live there for as long as you need or want to. You can use the money for almost anything you like including funding care at home. It allows cash to be released from the home without the hassle of having to move.
There are two main types of equity release:
- Lifetime mortgage
- Home reversion plan
This is where your loved one is loaned money against the value of the home, allowing them to retain the right to live there for the rest of their lives. The older your relative is and the greater the value of the property, the larger the sum that can be released. They will then be charged interest monthly on the amount borrowed, which can be paid monthly or rolled up into the loan amount.
Two advantages for lifetime mortgage:
- The equity release on your home is tax free. No regular repayments of interest or the borrowed capital are required.
- If you sell your house above the outstanding value of the loan, family can benefit from the subsequent inheritance
Home reversion plan
Under this plan an investment company buys, or arrange for someone else to buy, part or all of the property. Your loved one will receive the sale proceeds as cash that can be paid as regular instalments or as a single cash lump sum. Although your loved one loses sole ownership of the house, they retain the right to live in their home for the rest of their life.
The percentage of the value of the home paid by the reversion company is typically somewhere between 30% and 60% of its current value, depending on conditions such as the age, sex and health of the seller. The reason why sellers don’t receive more is that the reversion company will often have to wait a very long time to gain a return on their investment.
The equity release market is heavily regulated within the Safe Home Income Planning Code of Conduct established to ensure that the industry is monitored and fair standards are maintained.
The costs and fees of setting up equity release plans vary between different providers. Typically, the costs will include:
- Completion, arrangement or application fees to cover administration costs
- Valuation fees
- Solicitors fees
- Early repayment charge if the loan is paid off early
You will need to seek specialist financial advice to decide if equity release is right for you. Advisers can be found at Equity Release Council. Providers that are members of the Equity Release Council have a strict code of conduct and safeguard for your protection.
At edyn.care we understand the importance of having a funding plan in place for our clients. Our expert family care advisors are on hand to support you and answer any questions you may have on 020 3970 9900.
16 Jul 2021
State and local authority funding
1. The Care Act 2. National eligibility criteria 3. What is a care needs assessment 4. What is the financial assessment 5. Personal budget 6. What are direct payments? 7. What you can spend your direct payments on? 8. NHS ...Read more
16 Jul 2021
What is the cost of live-in care?
At Edyn, we know through our experience in helping many families to plan for live-in care, that the cost of care is a significant consideration. As you begin exploring your options, it’s important you are equipped with a ...Read more
16 Jul 2021
What are my funding options?
For all of us, there comes a time when you or a loved one needs care. At this point, choosing the right care, at the right time can be an overwhelming prospect. This is only compounded by potential financial implications. ...Read more