Long Term Care
by on 01·09·2016
When your clients are in the unfortunate position of having to find a care home for themselves or a loved one, what are the main factors they consider? Location, reputation, cost, how many restaurants, bars and pools it has?
As an alternative to spending their twilight years in the sun lounge of the local care home they may wish to book a series of 'round the world cruises' instead. Really? A well known cruise line are currently advertising a 104 night round the world cruise for just over £10,000 (£2,857 a month). The costs of long term care may be similar, with research carried out in 2014 showing the average cost of care home fees is £2,375/month increasing to £3,125/month for nursing care (source: Lang & Buisson 2013/14). This of course varies widely depending on the region in which you live, with costs in my local area being on average £4,000/month for nursing care - that round the world cruise is looking more appealing and better value by the moment. You can bet your local care home doesn't offer pina coladas or midnight buffets, but your average cruise ship does offer round the clock service and a fully stocked medical centre and on board doctor.
Whilst you may think I am kidding, when it comes to spending that kind of money in later life, many clients, and advisers, are still of the opinion that this is a cost they should not have to pay for a service they feel the NHS should provide. Regardless of your political persuasion and the ethical rights and wrongs of having to meet the costs for long term care, what are the implications of advising clients to try and arrange their assets so they are not accounted for when 'means testing' for care needs is assessed?
Whether clients have gifted assets away, invested in life insurance bonds or changed the ownership of their property to tenants in common, they would still need to have less than £23,250 in capital and savings in order to qualify for any kind of means tested assistance, or to apply for the deferred payment scheme; these only apply to social care (I will deal with nursing care in a moment). Most older clients will have a lower risk profile and taking this into account, you may be concerned about them holding a low level of cash compared to other assets such as property or insurance bonds. Other things to take into consideration are:
- Applying for means tested assistance means you have no or little choice over what care home you are sent to. With the ever reducing number of local authority owned homes, and general lack of available low cost rooms, this may even mean being sent to another county.
- The gap between what local authorities pay and what care actually costs is growing, with the majority of private care homes no longer accepting clients funded in this way.
- If you are local authority funded you cannot make a 'top up' contribution out of your own funds, to meet the cost of a more expensive care home, placing the onus on family to meet any shortfall.
Taking these factors into account, let alone the Kafkaesque nature of dealing with your local authority and social services, advisers and their clients should accept that the cost of care is something we all need to budget for when planning our retirement needs.
As it stands the CII only cover long term care as part of their CF8 'Long Term Care Insurance' exam. I would prefer to see this as part of the core pensions planning / retirement syllabus, to ensure that more advisers are educated in this area and not just look at the details in order to be able to advise on long term care annuities. In the meantime, what do you know about long term care? Below are some fundamental details which all advisers should be aware of when advising the older client:
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Social Care |
Nursing Care |
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What is it? |
Help and support in order to lead an independent life e.g. washing, dressing, eating, remaining mobile. This level of support can be provided by a care assistant and does not require a trained medical professional, such as a nurse. |
Help, support and care where the persons primary need is medical i.e. they need regular monitoring and or intervention from a trained medical professional in order to be maintained. |
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Who pays? |
You, unless you are eligible for means tested assistance in which case your Local Authority are responsible for costs. |
If you have a primary nursing care need then the NHS will pay, following a full assessment under the Continuing Healthcare Assessment framework. If you have only some nursing needs but your primary need is for social care, then you can apply for the nursing care contribution (up to £154/week). |
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How much does it cost? |
Circa £2,375/month |
Circa £3,125/month |
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What's the average stay? |
801 days = £67,925 |
392 days = £43,750 |
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Isn't there a cap on costs? |
The introduction of the Care Act 2014 which recommended a cap of £72,000 on the costs of care (excluding the 'hotel costs' of living in a residential or nursing home) has been deferred until 2020. |
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Long term care is a complicated and costly area, but well worth getting to know more about in order to help your clients live a comfortable life towards the end of their retirement. In addition to looking at the CII qualification there are some great resources for both advisers and clients, available from Age UK www.ageuk.org.uk/home-and-care/care-homes/ and the Money Advice Service www.moneyadviceservice.org.uk/en/categories/paying-for-care You may also want to get friendly with your local travel agent to know what special offers are available on those round the world cruises.
All comments and costs are based on a client resident in England. Different rules may apply if you live elsewhere in the UK.