Paying for Care Home Fees

The Basic Rules

Paying for care – Care Home fees; Nursing Home fees or Domiciliary Care fees – in England has been the subject to the current means-testing regime since 1992.  The ability to pay takes into account both actual income and what is known as “Tariff Income” from capital.

 

Income

Whilst there are numerous rules governing various sources of income, the most common for the elderly person going into care are:

  •  State Pension
  •  Personal Pension
  •  Occupational Pension
  •  Non-pension annuity income
  •  “Income” (actually withdrawals) from Life Assurance Bonds

I’ve not included Attendance Allowance in the above list as, as soon as the Council makes a contribution to care costs, the Attendance Allowance stops.  Of course, whilst Granny is still a self-funder the Attendance Allowance is available to help meet some of the costs.

All of the above sources of income are taken into account and the only allowances are:

  •  A Personal Expenses Allowance, which as the name suggests is to cover personal expenditure – grooming, telephone calls, etc.  The amount generally increases each year in April.  The amount is published in a Statutory Instrument and is £24.90 per week in 2017/18.
  •  Any amount up to 50% of the net pension (from personal or occupational schemes), which is actually paid to a Spouse living at home.

The tariff income is in three bands, as follows:

  • Over the upper capital limit – the tariff income is deemed to be sufficient meet all care costs at whatever level they may be.
  • Between the upper and lower capital limits – £1 per week for every £250 the capital exceeds the lower limit.  This is equivalent to a guaranteed return on that capital of 20.8% per annum net of charges and taxes.  Mission impossible!
  • Below the lower capital limit – the tariff income is deemed to be nil.

Capital

The upper and lower capital limits are published in a Statutory Instrument and are £23,250 and £14,250 in 2017/18.  Realistically, help with care home fees is only fully available when the lower capital limit is reached.

In assessing what is “capital”, the following basic rules apply:

  •  All savings and investments – cash on deposit, Individual Savings Accounts (ISAs), investments, buy-to-let properties, etc – in the sole name of the patient, with the exception of any amounts held in Life Assurance Bonds or Policies.  The latter are subject to a specific disregard dating back to the National Assistance Act 1948.
  •  A half-share of any jointly held savings, investments, etc.  This can give rise to issues when there have been unequal contributions and the patient being assessed has contributed significantly less than the other party.
  •  After an initial disregard of 12-weeks, the patients home.  Theoretically, the 12-week period gives time for the property to be sold, but, even if it hasn’t been sold, after the disregard it is no longer considered to be a pile of bricks, but a pile of pound coins towards the capital limits.

Disregards

The disregard is extended whilst the property is occupied by the Spouse or another family member aged below 16, over 60 or between those ages and registered disabled.  Clearly problems arise with family members between 16 and 60 who are not disabled.  Also, the disregard ceases immediately the Spouse or other family member stops living there.

The following allowances apply:

  • Funds in a Discretionary Trust and, in particular a “Personal Injury Trust” – a special type of Trust set-up to receive compensation from an accident, medical negligence, etc.
  • Personal possessions are excluded, even if they contain valuable antiques, paintings, etc.

So, if the sum total of the above assessment is in excess of the upper capital limit, then the patient is deemed to be a self-funder and is responsible for paying for care home fees in their entirety.

The future

All these rules were due to change in April 2016 – the threshold was due to increase to £118,000 and a cap of £72,000 was to be introduced.  However, the Government has “kicked these proposals into the long grass” – the announcement said, “deferred to 2020”, but the consensus view is that the proposals will never see the light of day again!  The Tory Manifesto for the 2017 General Election talked about raising the upper threshold to £100,000, but this was subsequently consigned to a further consultation.

What’s next?

If you have an issue with care fees, please ask for my help by completing the form below.




- Care Fees Planning

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About Clive Barwell

Clive Barwell is one of the most experienced and qualified financial planners working in the later life market today, he specialises in advice and guidance for the over 55s. To ask Clive a question, please email him at info@clivebarwell.co.uk. Alternatively, you can follow Clive on Twitter, connect with Clive on LinkedIn or see Clive's profile on Google+.