Complete Guide to Care Home Funding Options
This comprehensive guide demystifies care home funding in the UK, covering local authority support, self-funding options like care annuities and equity release, and NHS-funded care. It explains needs and financial assessments, deferred payment agreements, and the importance of seeking professional financial advice to navigate this complex landscape.
Important
Complete Guide to Care Home Funding Options in the UK
Navigating the world of care home funding can feel overwhelming, complex, and emotionally charged. For many families, the need for care comes at a time of stress and uncertainty, making financial decisions even more challenging. This comprehensive guide aims to demystify the funding landscape in the UK, providing clear, practical information to help you understand the options available for paying for care.
Whether you're exploring options for yourself or a loved one, understanding how care is funded is a crucial first step. We'll cover the various routes, from local council support to self-funding and specialist benefits, offering insights into each to help you make informed choices.
Understanding the UK Care Funding System
The funding of care in the UK is a shared responsibility, primarily involving individuals, local authorities, and the NHS. It's not a 'one size fits all' system; your eligibility for financial support will depend on a number of factors, including your assets, income, and the assessed level of your care needs.
Care Needs Assessment
Before any discussion about funding, a care needs assessment must be carried out by your local council's adult social services department. This assessment determines what level of care is required, not who will pay for it. It looks at your daily living activities, physical and mental health, and overall well-being to identify the support you need.
- Contact your local council's adult social services department to request an assessment.
- You have the right to an assessment regardless of your financial situation.
- The assessment can be done in person, over the phone, or online.
Financial Assessment (Means Test)
If the care needs assessment identifies that you require care, the local council will then conduct a financial assessment (often called a 'means test'). This assessment determines how much you can afford to contribute towards your care costs and how much the council might contribute.
The means test looks at your income and capital (savings, investments, and sometimes your home). The thresholds for financial support are reviewed annually and vary slightly across England, Scotland, and Wales.
Local Authority Funding: When the Council Helps Pay
If your financial assessment shows that your capital falls below the upper threshold, your local council may contribute towards your care costs. This support is means-tested, meaning the amount they pay depends on your ability to pay.
Current Capital Thresholds (England, 2024/25)
- Upper Capital Limit: £23,250. If your capital is above this, you are generally expected to self-fund your care.
- Lower Capital Limit: £14,250. If your capital is below this, you will not be expected to use it towards your care costs (though your income will still be assessed).
- If your capital is between £14,250 and £23,250, you will be expected to contribute £1 per week for every £250 (or part thereof) of capital you have above the lower limit.
Similar thresholds apply in Scotland and Wales, but it's crucial to check the most up-to-date figures from your specific local authority or the relevant government websites.
Your Home and the Means Test
Often, the most significant asset is a person's home. Your home is usually included in the financial assessment if you are moving permanently into a care home. However, there are important exceptions:
- If your spouse, partner, or a close relative who is over 60 or incapacitated continues to live there.
- If a child under 18 who you are legally responsible for lives there.
- If a relative who is disabled lives there.
If your home is included, but you don't want to sell it immediately, you might be offered a 'Deferred Payment Agreement' (DPA).
Deferred Payment Agreement (DPA)
A DPA is a loan from the local council, secured against the value of your home. It allows you to defer paying the full cost of your care until a later date, typically when your property is sold. This means you can move into a care home without having to sell your home straight away. The council will pay the care home fees on your behalf, and the amount will accrue as a debt, plus interest, against your property.
- How it works: The council pays your care home fees, and you repay them when your property is sold (or from your estate after you pass away).
- Interest: Interest is charged on the deferred amount, so it's important to understand the terms.
- Eligibility: You must own a property that is not disregarded in the financial assessment and have insufficient other assets to pay for care.
Self-Funding Your Care Home Fees
If your capital is above the upper threshold, you will be expected to pay for your care in full, at least initially. This is known as 'self-funding'. Even if you are self-funding, you are still entitled to a care needs assessment from your local council.
Being a self-funder gives you greater choice over which care home you choose, as you are not restricted by the rates the local authority is willing to pay. However, it's crucial to plan how you will meet these costs, which can be substantial.
Sources of Self-Funding
- Savings and Investments: Utilising cash savings, ISAs, bonds, or other investment portfolios.
- Selling Your Home: For many, the family home is the most significant asset and may need to be sold to release capital.
- Equity Release: This allows you to unlock some of the value held in your home without having to sell it immediately. It involves taking a loan secured against your property or selling a portion of it in exchange for a lump sum or regular payments. This is a significant financial decision and requires specialist advice.
- Care Annuities (Immediate Needs Annuities): These are specialist insurance products designed to cover the shortfall between your income and care costs for the rest of your life. You pay a lump sum to an insurance company, and in return, they pay a guaranteed income directly to your care provider for life. The amount paid out depends on your age, health, and the cost of care. This is an irreversible decision and should only be made after comprehensive financial advice.
- Income: Pensions (state, private, and workplace), attendance allowance, and other benefits contribute to your income.
NHS Funding: Fully Funded Care
In certain circumstances, the NHS may cover the full cost of your care home fees. This is known as NHS Continuing Healthcare (CHC).
NHS Continuing Healthcare (CHC)
NHS CHC is a package of ongoing care arranged and funded solely by the NHS for individuals who have a 'primary health need'. This means your main need for care is due to your health, rather than social care needs.
- Eligibility: This is not means-tested; it's based purely on your assessed health needs.
- Assessment Process: Involves a 'Checklist Tool' to see if you might be eligible, followed by a 'Multi-Disciplinary Team (MDT) Assessment' using a 'Decision Support Tool' (DST).
- Key Criteria: The assessment looks for a 'primary health need' based on the nature, intensity, complexity, and unpredictability of your needs. This often applies to individuals with severe and complex health conditions, such as advanced dementia, significant physical disabilities requiring specialised nursing, or end-of-life care needs.
- What it covers: If eligible, NHS CHC covers the full cost of your care, including accommodation, personal care, and healthcare costs, whether in your own home or a care home.
NHS-funded Nursing Care (FNC)
If you are not eligible for NHS Continuing Healthcare but require nursing care from a registered nurse within a care home, you may be eligible for NHS-funded Nursing Care (FNC). This is a weekly contribution from the NHS paid directly to the care home to cover the cost of nursing care.
- Eligibility: You must be assessed as needing care from a registered nurse and live in a care home that provides nursing care.
- Amount: This is a fixed weekly rate, not means-tested, and is paid directly to the care home.
- Assessment: The care home or your local NHS Integrated Care Board (ICB) can arrange an FNC assessment.
Other Financial Support and Benefits
Beyond the main funding routes, there are several benefits and allowances that can help towards the cost of care, regardless of your primary funding source.
- Attendance Allowance: A non-means-tested benefit for people over State Pension age who need help with personal care or supervision due to illness or disability. It has two rates depending on the level of care needed. This can be paid even if you are self-funding or receiving council support, and it is not counted as income for the financial assessment (though it may be used to help you pay your assessed contribution).
- Personal Independence Payment (PIP): For people under State Pension age who have difficulties with daily living or getting around due to a long-term illness or disability. Similar to Attendance Allowance, it's not means-tested and can contribute significantly to care costs.
- Pension Credit: An income-related benefit made up of Guarantee Credit and Savings Credit. It can top up your weekly income if you are over State Pension age and on a low income. This can be particularly relevant for those receiving local authority funding, as it can increase your disposable income.
- Universal Credit: For those under State Pension age and on a low income, this benefit can include elements for housing and daily living costs.
- Council Tax Discount/Exemption: If your property is empty because you (or a loved one) have moved into a care home, you may be eligible for a council tax discount or exemption. Check with your local council.
Top-Up Fees (Third Party Contributions)
If your local authority is funding your care, they will have a standard rate they are willing to pay for a care home place. If you or your family choose a care home that costs more than this rate, a 'third party top-up fee' may be required. This is the difference between the council's rate and the care home's actual fee.
- Who pays? The top-up fee must be paid by a third party (e.g., a family member, friend, or charity), not the person receiving care, unless they are able to demonstrate they can afford it without impacting their basic living needs.
- Agreement: A formal agreement must be signed between the local authority, the care home, and the third party payer, confirming their commitment to pay.
- Sustainability: The third party must demonstrate they can sustain the payments for the foreseeable future, as failure to pay could result in the individual having to move care homes.
Seeking Professional Advice
The world of care home funding is complex and constantly evolving. Making the right decisions can have significant long-term financial implications. It is almost always advisable to seek professional, independent advice.
- Specialist Care Funding Advisors: These are independent financial advisors who specialise in care funding. They can help you understand all your options, including annuities, equity release, and benefit entitlements, and create a long-term financial plan.
- Solicitors (Elderly Client Specialists): A solicitor specialising in elderly client law can advise on wills, powers of attorney, deputyship, and how these impact care funding.
- Local Authority Adult Social Services: They are responsible for conducting assessments and can provide information about local funding options and services.
- Charities and Advocacy Organisations: Many charities offer free advice and support on care funding, benefits, and navigating the care system.
Remember, the goal is to secure the best possible care for your loved one while ensuring their financial well-being is protected as much as possible.
Where to Find More Support and Information
Frequently Asked Questions
What is a care needs assessment, and do I need one even if I'm self-funding?
A care needs assessment is an evaluation by your local council to determine what support you need, regardless of your financial situation. Yes, it's highly recommended to have one even if you plan to self-fund, as it formally identifies your care needs, which can be crucial for accessing benefits like Attendance Allowance or for future NHS Continuing Healthcare assessments.
What is the difference between NHS Continuing Healthcare (CHC) and NHS-funded Nursing Care (FNC)?
NHS Continuing Healthcare (CHC) covers the full cost of your care if your primary need is health-related and complex. It's not means-tested. NHS-funded Nursing Care (FNC) is a fixed weekly contribution from the NHS paid directly to the care home to cover the cost of nursing from a registered nurse, for those who don't qualify for CHC but still need nursing care.
Can I keep my home if the local authority is funding my care?
Your home is usually included in the financial assessment if you move permanently into a care home. However, it's disregarded if certain people still live there (e.g., a spouse, dependent child, or certain relatives). If your home is included, but you don't want to sell it immediately, you might be offered a Deferred Payment Agreement, which is a loan secured against your property.
What is a 'top-up fee' and who pays it?
A top-up fee is the difference between the amount your local council is willing to pay for your care home place and the actual fee charged by your chosen care home. It must be paid by a 'third party' (e.g., a family member or friend) and cannot usually be paid by the person receiving care, unless they can prove they can afford it without impacting their basic living needs. A formal agreement must be in place.
Should I sell my home or consider equity release to pay for care?
Both selling your home and equity release are significant financial decisions with long-term implications. The best option depends on your individual circumstances, financial goals, and family situation. It is crucial to seek independent financial advice from a specialist care funding advisor or an accredited later life advisor to explore all options, understand the pros and cons, and make an informed decision.
Need More Help?
Support Organisations
- Age UK:0800 678 1602
- Carers UK:0808 808 7777
- Alzheimer's Society:0333 150 3456
- Parkinson's UK:0808 800 0303