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Busting the myths about the cost of care

Paloma Kubiak
Written By:
Paloma Kubiak

Major reforms to the social care system are on the horizon, including a headline-catching commitment from the government to limit the cost of care to £86,000 per person over their lifetime.

Some critics have said that this figure is misleading as it just covers the cost of ‘care’ – it doesn’t include accommodation in a home, food or other expenses, so many people will still pay tens or even hundreds of thousands of pounds more for their care.

Here, we bust the myths and tackle the most frequently asked questions about the cost of care.

How much are care home fees?

The average cost of staying in a residential care home in England is £681 per week, according to consumer champion Which?. However, including nursing care, it takes the cost to an average £979 a week.

Around 125,000 people staying in a care home are self-funders while some 234,000 receive some financial help from their local authority, according to the Office for National Statistics.

How long is the average stay in a care home?

Since the average stay in a care home is one year for people needing nursing assistance and two years for those who stay in a home but don’t receive nursing, according to the British Geriatrics Society, costs can add up considerably.

How can you find out if you have to pay care home fees?

When applying to the local authority for care, an assessment of your financial situation, or means test, is undertaken to see if you qualify for support.

Under today’s rules, only those with assets under £23,250 qualify for financial support from their local authority. People with less than £14,250 in assets do not have to pay anything at all for their care. And. currently, people with assets worth above £23,250 pay the full cost of their care.

What’s changing in the future?

From October 2023, the threshold for receiving financial support towards care costs will rise from £23,250 to £100,000. This is called the ‘upper capital limit’ and people whose finances come in above this level will be self-funders who will pay the full cost of their care.

The ‘lower capital limit’ will rise from £14,250 to £20,000, so people with assets under £20k will not have to pay anything for their care.

In-betweeners who have assets above £20,000 but below £100,000 will pay something towards their care – the amount is decided by a tariff based on their financial situation.

The changes only apply to England. Scotland and Wales are still undertaking their own reviews so at present their existing funding arrangements remain.

Which assets do they look at?

There are lots of intricacies to the means test with various clauses around what’s included and not included. But broadly, the assessment will look at your regular income, including pension payments and most benefits.

With benefits it’s assumed you’re claiming everything you’re entitled to, so it makes sense to have those claims in place.

Your capital – meaning savings, investments, properties in the UK or abroad and business assets  – are also considered.

Savings in a joint account held by spouses, for example, will be treated as divided equally between the two people.

How does the £86,000 cap on care costs work?

A new cap on care fees will be brought in from October 2023, but it’s worth understanding now how it will work.

When the government says that no-one will pay more than £86,000 for their care, what it means is that each individual has a metaphorical calculator that adds up just the cost of their ‘care’. This includes the nursing and assistance they need, whether it’s with washing and dressing, feeding themselves or managing health problems.

This applies to care received either in someone’s own home or in a residential care home.

The crucial point for people to understand is that any other costs outside of the definition of ‘care’ will not count towards the £86,000 cap. These include:

  • Room and board in a care home
  • Meals
  • Utility bills
  • Toiletries
  • Other living expenses

For example, if someone is paying £1,000 a week while staying in a care home, perhaps only £400 of that will be added to their lifetime bill for ‘care’.

When the bill for the ‘care’ component hits £86,000, care costs will be covered, reducing the overall bill for the individual. Full details on the care reforms are published on the government website.

How much will it really cost to stay in a care home?

Although staying in a care home doesn’t feel much like a holiday, the bill for room and board is usually referred to as ‘hotel costs’.

The government has set a rate of £200 per week which individuals must pay towards their hotel costs. Over a year, £200 a week amounts to £9,600. Again, these costs will not count towards the £86,000 care cap, and people will be responsible for their daily living costs throughout the time they need care.

What happens if you enter care before October 2023?

People going into care or already in care will also have a ‘care account’ set up from October 2023, in the local authority where they are usually resident.

At that point the calculator will start totting up their care costs, but costs accrued before October 2023 won’t be counted.

Will I have to sell my home?

This is one of the biggest worries for people needing care.

If you own your own home and still live there, or go into a care home on a temporary basis, its value isn’t included in the means test.

People who move into a care home permanently may have their home’s value considered as capital after a 12-week grace period, unless their spouse or certain relations live there.

If your home is the main asset that will be used to fund your care, you can enter into a deferred payment agreement with the local authority where the property is sold after you pass away.

What you can do to plan ahead

The prospect of needing care isn’t something anyone wants to dwell upon but it’s vital that people discuss how they will meet these costs with family members and a financial adviser, ideally decades in advance.

By planning in advance and perhaps setting an investment pot or portion of your pension aside to cover any potential care costs in the future, you can help to take the stress out for later life.

Financial advisers are used to helping people pay for care in the most efficient way possible and can also explain what the full costs are going to be.

Be mindful that a person’s care costs tend to increase as they age and their needs become more complex.

Annabelle Williams is personal finance specialist at digital wealth manager, Nutmeg