Jim Kirby was a cautious saver all his life, but now aged 84 he is nearly broke because of £86,400-a-year care home fees and an exhausting battle to get the state to make a contribution.
The fees pay for his wife, Maureen, who since September 2021 has been in a £7,200-a-month nursing home.
He was told Maureen had just months to live when she was discharged from hospital after a severe fall in 2021, and she could not be looked after at home. But she has survived far longer than anyone expected – even though she can no longer speak, or recognise her husband of more than 50 years.
“I’ve run out of money. I’ve cashed out of everything I can. I’m 84 and the future looks bleak,” Kirby says.
For the past two years he has fought the NHS, arguing that the care fees should be paid under its continuing healthcare scheme (NHS CHC), but to no avail. As is the case with many other people, the state won’t pay a penny of Maureen’s fees until the couple are down to their last £23,500. (If an individual needs care, any savings etc that belong solely to their partner won’t be taken into account for paying the costs, but the rules are more complex for joint current and savings accounts.)
Maybe you, or one of your parents, is in Jim or Maureen’s situation. Maybe your parent has been hospitalised after a fall and cannot cope at home any more. You have checked out all the advice on adapting a home, home care and even live-in carers, but none of it stacks up.
So it’s time to find a home and then figure out how on earth to pay for it.
The first step is to contact your local adult social services department to arrange a free “care needs assessment”. A social care professional should assess how your relative or friend is coping with everyday tasks.
There are two types of homes. Care homes, also called residential care homes, offer help with personal care, such as dressing and washing, as well as meals and social activities. Nursing homes, on the other hand, provide registered nursing care for individuals with medical needs, whether after leaving hospital or because of a long-term condition.
How do fees stack up?
In the UK there are now about 17,100 care and nursing homes, with 408,000 occupants. Of these, about 70% are residential care homes while the remainder are nursing homes. The average cost for residential care in 2022 was £800 a week, or £41,600 a year, according to the charity Age UK.
However, there are big regional differences: the median home in the London borough of Islington charged £82,264, while in Hull and Wigan the median cost was about £33,000. You can confidently add 5-10% on top for fee increases over the past year. Nursing homes are even more expensive, coming in at an average of £1,078 a week, which works out at about £56,000 a year.
Measure that up against the average UK pensioner income – about £12,500 a year for a single pensioner and £26,900 for a couple – and it is evident that most people face a huge financial headache.
Do your research
Think of the process as if you were buying or renting a home. Once you have established what type of home you need, ask friends and family for recommendations. They may be able to point you towards a care home with a good reputation.
A good place to start is the website of the health and social care regulator for where you live. In England, for example, this is the Care Quality Commission (CQC). It has a search tool to find homes in your area and its reports will tell you if, after an unannounced inspection, it found the home was “outstanding”, “good”, “requires improvement” or was “inadequate”.
When we searched for care homes within a 10-mile radius of an East Sussex address, the CQC site listed 123 homes, of which only one was “outstanding”, while 19 required improvement.
Unfortunately, the CQC website does not list fees and costs at the homes. “The sector has always been opaque on pricing,” William Laing of the healthcare consultancy LaingBuisson says. “They have made some progress on publishing fees, but it’s not fully transparent.”
In the past, care homes were run mostly by local authorities, but today they are almost exclusively run by private companies. Gross margins of the big operators range from 8% to 42%, with profits flowing into the coffers of private equity funds and other investors who have moved into the sector.
In 1980, just after Margaret Thatcher took power, there were more than 225,000 beds operated by local authorities, the NHS and not-for-profits, and just 47,000 private ones. Now, the private sector has 380,000 registered beds, while the public sector has shrunk to just 25,000.
How to pay for the home?
Despite the Kirbys’ problems with getting assistance, a substantial number of people do actually have their fees paid by the state. Last year, 127,000 care home residents got all their fees paid by the local authority, according to LaingBuisson. Another 39,000 were “quasi self-pay”, where the local authority paid part of the fees.
If, after carrying out the care needs assessment, a social care professional agrees that the individual is in need of a care home place, you then move on to the next key step: the means test.
The means test varies across the UK nations. England and Northern Ireland have identical rates – local authorities will start to help with the fees once a person’s capital falls below £23,250, and will pay the maximum amount once their capital is less than £14,250. That £23,250 includes savings, property, investments and pensions, although the home is disregarded if it is still occupied by the person’s partner.
In Scotland, the means test allows an individual to keep £32,750 in capital before local authorities begin to pay, and will pay in full once a person’s capital is less than £20,250. All Scottish care home residents receive help with personal care costs. The local authority will pay a flat rate of £233 a week directly to the care home provider, and £105 more if the person is assessed as needing nursing care.
In Wales, when an individual’s capital is below £50,000, the local authority will help pay for residential care, but it will take into account the individual’s pensions and welfare benefits in assessing how much assistance will be offered.
If an individual going into care has been living in a council flat and surviving on just the state pension, then it is likely the local authority will pay the care home fees. If the local council is paying some or all of the costs, the person still has a right to choose their own care home, subject to certain conditions, says Age UK, which has a treasure trove of information and guidance on care homes on its website. Another useful one is UK Care Guide.
It is also possible – again subject to various criteria – for a person going into local authority-funded care to pick a more pricey home and arrange to pay “top-up” fees.
But if, say, the individual has no surviving partner, owns their own home, has a decent private pension and maybe a few Isas, then the chance of the local authority paying the fees is virtually zero.
So what are the choices?
• Sell the existing home;
• rent it out;
• equity release; or
• deferred payment agreements.
Taking those in order, let’s say the person releases £350,000 from the sale of their bungalow. The interest on that money is now very good: if they put £100,000 into the best easy access account (currently Ulster Bank and Coventry building society pay 5.2%) and the remaining £250,000 is split among a number of two- and three-year bonds (with a maximum of £85,000 in each) that are now paying about 5.7% to 6%, the total interest would be about £19,700.
Let’s assume the individual has the full state pension of £10,600 a year plus a private pension of £10,000. In total their income will be £10,600 + £10,000 + £19,700 = £40,300, or £34,754 after tax. Suddenly a £50,000 annual care home bill doesn’t look so bad – only about £15-20,000 will have to be drawn down each year from the individual’s capital.
No one can be sure of future interest rates, but if, as expected, inflation falls then so will these interest rates, so it would be a good idea to lock into a mix of longer-term bonds if possible (for example Cambridge Building Society’s 5.5% five-year bond), while keeping enough in easy access to pay the annual bill.
Crucially, obtain a lasting power of attorney (LPA) over your parent or relative – ideally before they go into care and while they still retain mental capacity. There are two types: one for financial matters, the other for healthcare decisions. You can make an LPA for England and Wales on the government’s website.
Equity release or renting out the property look less attractive now that interest rates have risen.
An 85-year-old who went down the equity release route could easily unlock £170,000 from the value of their £350,000 home, but would have to pay a (rolled-up) interest rate of at least 6% on that money, so this would be an expensive option.
Renting out the property, meanwhile, may not deliver an amazing return and could involve large amounts of hassle.
Another way to avoid having to sell the home is to apply to your local council for a deferred payment agreement. Here you delay paying your care costs until a later date by having a legal charge placed on your property by the local authority. The money to repay the care home costs will have to be paid at a later stage (usually on death), and interest will be charged on the total amount.
You can’t just give your home away (say to a son or daughter) and pretend your parent now doesn’t have any money to pay care home fees. This is called “deprivation of assets” and the local authority will still count the value of the property in its means test if it suspects it has been deliberately given away to avoid care home fees.
One other financing option to consider is a “care fees annuity”. With these, basically, you give your money to an insurer, which then promises to pay the care home fees in perpetuity.
For simplicity’s sake, let’s say an ailing 85-year-old gives £200,000 to an insurer, which in turn guarantees to pay the £50,000 care fees in perpetuity. If he or she survives four or more years, then they are in the money. But if the person dies after one year, the estate won’t receive any money back from the insurer, and it will have turned into an expensive financial mistake.
These are very rough figures and will vary hugely per individual. The great benefit is that the interest on £200,000 left in the bank is taxed, but if it is paid as an annuity directly to the care provider, it is tax-free.
Will the NHS pay?
If the NHS assesses the person going into care as having a serious “primary health need”, it will pay the nursing home fees under something called “continuing healthcare” (NHS CHC). But, as Jim Kirby has discovered, it is extremely hard to access.
His wife, Maureen, was in hospital for a month after her fall and, with steeply declining cognition and a terminal diagnosis, was then moved to another hospital for 12 weeks.
He was then informed that Maureen would be placed in a care home more than 30 miles from his home, where the NHS would pay for six weeks of care only. After that, he was on his own.
“I was told that if I chose a different care home closer to where I lived, we would lose the six-week funding, and I would be responsible for all payments from day one,” he says.
“From what I have gleaned, it seems quite clear that terminally ill people should have continuing NHS care, particularly if their life expectancy is a matter of months, but also even if their life expectation is longer.”
But, since then, he has been on a “two-year voyage through the seemingly infinite number of agencies and departments”. Many people will feel daunted and overwhelmed by trying to claim CHC.
One option is to seek help from Beacon, a social enterprise set up to help people in this situation. It is assisting Jim, but it is not free. The charges start at £1,200.
When assessing someone for CHC, the NHS has a checklist where the patient is scored on things such as cognition, continence, breathing, mobility and so on. If your parent is leaving hospital for a care home, request that the checklist is carried out. Beacon says: “Don’t be put off if your health professional thinks you are wasting your time. You have a right to request a checklist assessment.”
Care home checklist
Read up and then visit Ask friends and family for recommendations then look up the inspection reports. In England you can find these on the Care Quality Commission website and there are equivalents for the other home nations.
The building Is it well maintained? Does it smell clean and fresh? Is it a comfortable temperature? Are there accessible gardens?
Staff What is the ratio of staff to residents – during the day, at night and at weekends? Are all staff trained? Is staff turnover high? Are they welcoming? What nursing qualifications, if any, do staff have?
Care needs Will the care home carry out an assessment of your parent before his or her arrival? Will the toilet and bathroom meet your parent’s needs? Are residents helped to the toilet? Is the home linked to a specific GP practice?
Food What is the daily menu like? Does it vary often? What times do meals take place? Can they be taken in your parent’s room if necessary?
Existing residents If possible, ask them directly how they are finding the home. Are they kept active? Do they use lounges/social areas?
Fees What are the monthly fees? Can your parent stay for a trial period? Is a deposit required? How are fees reviewed each year?
The proposed lifetime care cost cap
Social care is a devolved area of public policy, which means the different home nations can take their own approach. This month was meant to herald the start of an improved funding system in England, announced by Boris Johnson’s government in 2021. He promised that instead of paying until you are down to your last £23,250, you would start receiving help from the state once the value of your assets fell below £100,000. There would also be a maximum payment towards personal care of £86,000.
In any case, Johnson’s promise did not last long. Last year, the chancellor Jeremy Hunt delayed its implementation until October 2025 – after the next general election. However even if there is a change of government, Labour is expected to stand by the £86,000 cap.
• This article was amended on 18 and 19 October 2023. An earlier version said that there were 17,100 care homes in the UK; this should have said care and nursing homes. People in Wales who have under £50,000 will not get their care paid for automatically, but will need to be assessed. Also to clarify, the cost of individual care does not usually include any savings that belong solely to a partner, but the rules are more complex for joint current and savings accounts.
