Further Information As these rules are complicated, social services can provide further information. They should also have produced a booklet on funding permanent care giving some useful case studies [available from Welfare Rights section]. If you are experienced in financial matters and wish to assess your benefit entitlement in detail, the “Paying for Care Handbook” published by the Child Poverty Action Group is the recognised reference work on benefit rules.
The Future In 2010, the government set up a commission, chaired by Andrew Dilnot, to propose recommendations which would create a better care system – one which was more sustainable, fair, affordable and easier to understand. The recommendations, published on 4 July 2011 were: Greater government investment into the care system Raising the means testing threshold from £23,250 to £100,000 Placing a ‘cap’ on care costs at £35,000 Disability Benefits should remain The Government has announced a period of consultation on the specifics in Autumn 2011 after which a White Paper will be published in Spring 2012.
Financial Planning for Privately Funded Residents
These days many elderly people taking up permanent residence in a care home own their homes but have been relying on state benefits for much of their income. Their house can represent the major part of their wealth, and it is this value which sets them to be ineligible for local authority contributions to care fees. However, an elderly person cannot be forced to sell their house - it may just be, for them, the only practical way to convert the asset into cash unless they can secure a “Deferred Payment Arrangement” [interest-free loan] with the local authority. Other people may also have extensive cash, investments, and occupational pension income which prompts them to seek professional financial advice since they have a greater range of options open to them. When selecting an Independent Financial Adviser [IFA], make sure the adviser is an expert on long-term care fees and benefits - and from November 2006 is required to have passed an exam called CF8. In addition, any funding scheme also needs careful analysis to consider tax and inheritance issues.
There are a number of different ways that people can use their property to fund long term care. For example; Sell the house at the end of the initial 12 week period and use the cash to pay the care fees. A mortgage could be raised to provide the cash required to pay the fees, and the property rented to family or a third party whose rent could pay the mortgage. A third party could occupy the property, paying re n t .
The uncertainty with all the above schemes, and others, is that they may not generate enough cash to fund the care home fees for as long as is necessary. Some insurance companies offer financial products which can help. Two popular schemes are:- Immediate Care Needs Annuity” An “immediate care” single premium annuity can be purchased from an insurance company on entering a care home or if already in residence. The property would normally be sold to raise the premium, which is a single payment. The annuity would be designed to provide the monthly income required to supplement the basic state benefits to meet the care fees, and such annuities guarantee income for life. Single premium “Whole of Life Policy” (Investment Bond) A cash sum is used to buy a policy. The policy would have an open term. A maximum of 10% of the initial value is available for withdrawal each year (on a monthly basis) to help pay fees. The policy could refund the whole of the original premium if it still has a value on death even though the original value has eroded. The withdrawals are effectively tax-exempt for basic rate tax payers. Such a scheme would be put together by a specialist IFA. These are sophisticated products and require professional advice. With both of these schemes the elderly person is still eligible for the basic retirement pension and also DLA or the Attendance Allowance which is non-means tested and non-taxable.
“There are a number of different ways that people can use their property to fund long term care.”
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