Paying for later-life care post-Covid-19
PUBLISHED: 11:27 01 May 2020 | UPDATED: 11:27 01 May 2020
The recent virus crisis has the highlighted pivotal role played by care homes – but paying for them will remain a struggle for millions, says Peter Sharkey.
In a recent, pre-lockdown article published in the Telegraph, British conservative author and journalist Douglas Murray claimed that “intelligent people steer clear of politics these days”.
He had a point. There are very few politicians who distinguish themselves as intellligent, let alone as clear leadership material – though the Chancellor Rishi Sunak is a notable exception. The coronavirus crisis has highlighted this dearth of political talent. Indeed, it’s a bit worrying that although the ship of government appeared relatively stable, once the PM was sidelined after contracting the virus, no one stepped up to the plate and gave the impression of being in control.
Like Mr Sunak, our Prime Minister projects a commanding personality. What’s more, in contrast to several of his recent predecessors, he tends to get things done. Which brings me to a comment made the day after the Tories clinched a thumping election victory last December, whereby he said that nobody should have to sell their home to pay for the costs of care.
He’s right – yet as the population ages and care costs soar (the average cost of a room in an English nursing home is now £937 a week, the equivalent of £48,700 a year), distressing nightly news reports have made it painfully clear that although care homes are integral to the provision of later-life care, they are considered slightly peripheral to the core healthcare system, probably because many are privately owned.
In contrast to the established custom in Asia and the Far East (Japan especially) where elderly folks are cared for by their families under one roof, this tends not to be the case closer to home.
Yet such is the astronomic cost of care that perhaps we will become more like the Japanese and accommodate elderly parents once they become too frail to look after themselves. For the time being, however, we must contend with social care funding rules – which are labyrinthine at best – and accept, albeit reluctantly, that significant regional variations in the quality and cost of care exacerbate the situation.
It is scandalous that what are deemed ‘self-funded care home residents’, i.e. those with assets of more than £23,350, can pay up to 35pc more than councils are charged for exactly the same level of care. As a consequence, millions of families are contemplating how increasingly costly care will be paid for.
Unfortunately, there are a thousand other longer-term matters for the government to address once it is able to reignite the economy. Spending lots of money will be central to any economic recovery plan, so it is to be hoped that care costs will not resume their ‘peripheral’ status once the coronavirus is defeated.
Don’t hold your breath, however, and in the meantime it might be worthwhile exploring the equity release option.
Equity release enables homeowners aged 55 and over to release a percentage of the equity built up in their homes, often over many years. Once released, the funds, which are tax-free, may be used for any purpose, including social care.
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Homeowners have the option of taking either a lump sum or using a ‘drawdown’ equity release plan to withdraw smaller, regular amounts – an arrangement that can prove convenient when care costs are likely to be spread over a longer period.
There are no monthly payments to make for withdrawing equity: the funds only become repayable either when you die or move into full-time residential care, usually from the property sale proceeds. Moreover, should one spouse need to go into full-time residential care while the other remains in the family home, the property’s value should not be included in the local authority’s means test. This should result in reduced care costs, although it is dependent upon what other income and assets the couple may have.
Releasing equity is not for everyone – and before plans are made to use equity release as a means of paying for later life care, it is important that homeowners take advice from a fully-qualified equity release adviser.
In a perfect world, ways of delivering later life care at negligible cost would be found, but most folks who have long cultivated more than a few grey hairs know this is highly unlikely. Instead, they recognise the merit in exploring how care can be paid for without relying on the state.
Equity release: your questions
In light of the current crisis, readers may wish to learn more about equity release.
You can read hundreds of blogs and articles dealing with the subject on the Moneymapp website, including one of the UK’s best equity release blogs at: https://www.moneymapp.com/blog
In addition, there’s a wealth of information to be discovered at: https://www.moneymapp.com/equity-release.
Alternatively, if you have any queries regarding equity release, you may email your questions to: firstname.lastname@example.org
Please note, Moneymapp.com cannot advise readers on whether equity release is suitable for them, but it can introduce you to qualified professional experts who can answer your specific equity release questions. When emailing, please provide a daytime telephone number.
For more financial advice, check out Peter Sharkey’s regular column, The Week In Numbers.
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