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Planning for Care Fees in later life

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One of the biggest challenges of the 21st century is Britain’s ageing population. Improvements in health, diet and preventative care mean we are living for longer. In 2012, the number of over 65’s in the UK surpassed 10 million for the first time.

The ‘oldest old’, which describes those aged 85 or over, has also risen sharply. During the 2011 Census, there were 1.25 million over 85’s in England and Wales, up by 30% from a decade earlier.

As a result of this ageing population, one in three women over age 65 will need residential care at some point in their lives. For those women who do not require residential care in later life, there is a 50% chance they will need some form of care at home.

These changing demographics have big implications for our care in later life.

At the same time as our population ages, funding for older people’s social care has stagnated. Public funding for later life care has been cut by 10% in real terms and local authorities have scaled back their funding for social care.

There has been a big increase in the number of older people using residential nursing homes, around 21% higher at 164,000 according to the most recent figures. The number of older people using nursing care has also risen, to around 79,000 people today.

With greater demand for care and less publicly available funding, the expensive cost of later-life care will often fall on individuals and families.

In the South East, the average cost of a residential care home is £669 a week. This rises to an average of £920 a week if nursing care is required. Those who prefer to receive care in their home in later life face average costs of £248 a week in Surrey, and they also need to meet the cost of utilities and maintenance for their property.

These are big numbers and can seem daunting for families who need to make important decisions about care packages for elderly relatives.

A means testing system is in place in England, which determines if any financial assistance is available from your local authority. This means test considers the income and capital assets of the person needing care. If you have assets or savings of less than £23,250, the local authority will help to pay for your care costs. You pay your own care costs if you have more than this.

The value of your home is often excluded from this means testing process; it will not be counted as capital if certain people, such as your husband or wife, still live in the property.

Recognising the financial and social challenges prompted by an ageing population, the government instigated a formal review of care funding, which was started by the Dilnot Commission in July 2010. This resulted in a new Care Act in 2014, which came into force last year, although some key aspects of the legislation have been deferred until 2020.

If the government decides it is affordable, we could see the introduction of a cap on how much you have to spend on your care needs. Once this cap reaches £72,000, the local authority will then pay for your eligible needs. The cap does however exclude daily living costs, such as food and accommodation in a care home, and critics have warned that once introduced the cap is likely to benefit few individuals.

When an elderly parent or relative needs care, either in a residential care home or within their own home, it can be a worrying and stressful time for their families. Understanding the various costs of care and any benefits available to help with these costs can quickly become a full time job.

There are some simple steps families can take before the need for care arises, to make things less stressful in the future.

Putting in place a lasting power of attorney is a must. These legal documents are a way of giving someone you trust the legal authority to make decisions on your behalf if you lack mental capacity at some time in the future. There are two types and both should be considered. One covers financial decisions and the other takes care of health or care decisions.

You can only set up a lasting power of attorney if you have the mental capacity to make decisions, so putting this in place early is important. The document must be registered with the Office of the Public Guardian before it can be used.

Another simple step to consider is discussing future care needs for elderly parents or relatives. The best prepared families will go as far as visiting residential care homes, making a choice before the need for care arises. This can put minds at rest when health does decline, with families safe in the knowledge that the choice of home was made jointly.

Care fees planning can be a complex area of financial advice, which is recognised by the requirement from the Financial Conduct Authority (FCA) for advisers to hold a specialist qualification. A handful of professional advisers who choose to work in this area of advice go a step further, completing the Later Life Adviser Accreditation.

This accreditation from the Society of Later Life Advisers (SOLLA) is the recognised benchmark for advice skills of those advisers who specialise in the older client market. It represents a real endorsement of their skills and experience in working with, and understanding the needs of, older people and their families and carers.

With an ageing population and many older people living with dementia, there is a good chance you or someone close to you will need to address later-life care planning at some stage in your life. Making good decisions based on a full understanding of the various costs, rules and benefits is easily achieved by working with an experienced independent financial adviser.

Martin Bamford is a Chartered Financial Planner, Chartered Wealth Manager and Accredited Later Life Adviser. He is managing director of Informed Choice, an award-winning firm of Chartered Financial Planners based in Cranleigh, Surrey.

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