When we discuss retirement planning with clients, often our focus is on the ‘active phase’ of retirement, the period when long-held goals can be achieved and treasured memories can be made.

The active phase typically involves increased expenditure, for example, on holidays and travel, remodeling the house or buying a holiday home, however, later life may also involve increased expenditure especially when we take into account the costs associated with long term care.

What Do We Mean By Long Term Care?

Long term care can involve a variety of services designed to meet a person’s health or personal care needs and can involve:

Care in the person’s home.
Care within the community.
Care within a residential or nursing home.

The most common type of long-term care is personal care which typically involves help with activities of daily living which includes bathing, dressing, grooming, eating and moving around.

Sometimes the need for long term care can occur suddenly, for example, after a sudden illness such as a heart attack or stroke, or can occur more gradually as someone gets older and more frail or an illness or disability gets worse.

Risk Factors

There are a number of risk factors that can affect a person’s need for long term care including:

Age – the risk increases as people get older.
Gender – women tend to be at a higher risk than men, primarily because they live longer.
Marital status – single people are more likely to need paid care than married people.
Lifestyle – poor diet and lack of exercise can increase a person’s risk.
Health and family history – can also make someone more prone to needing long term care.

How Much Does Long Term Care Cost?

The cost of long term care can vary enormously depending on the type of care you need, the provider being used and where you live.

According to Age UK, the typical cost of care in the home is £15 per hour. For someone needing care three times a day, that’s £45 per day which amounts to £315 per week or £16,380 per year which is not an insignificant sum.

Again, according to Age UK, the typical cost of a residential home is £800 per week (£41,600 per year) and £1,078 for a nursing home (£56,056 per year).

Those suffering from dementia will typically pay more and costs can be as high as £1,600 per week (£83,200 per year).

Given the amounts involved, it makes sense to factor these costs into the financial plan to see how they can be funded. For example, from existing capital or pension income or it might involve an Immediate Needs Care Plan or selling the home.

Attendance Allowance

It is worth noting that many people over the State Pension Age can claim for Attendance Allowance although many don’t apply.

Attendance Allowance is not means tested and is based on the level of care you need. The following needs to apply:

you have a physical disability (including sensory disability, for example blindness), a mental disability (including learning difficulties), or both.
your disability is severe enough for you to need help caring for yourself or someone to supervise you, for your own or someone else’s safety.
you have needed that help for at least 6 months.

There may be other benefits that you are entitled to and it is worth checking whether these apply to you.

Lasting Power of Attorney

As part of any financial planning strategy, it is sensible to put in place a Lasting Power of Attorney (LPA). This is a legal document that lets you appoint one or more attorneys to help you make decisions or to make decisions on your behalf.

A LPA gives you more control over what happens to you if you have an accident or illness and cannot make your own decisions i.e. you lack mental capacity. You need to be over 18 and have mental capacity when you make the LPA.

There are two types of LPA:

Health and Welfare
Property and Financial Affairs

Health and Welfare LPA

This provides the attorney with the power to make decisions about things such as:

Your daily routine e.g. washing, dressing and eating.
Medical care.
Moving into a care home.
Life sustaining treatment.

This LPA can only be used when you are are unable to make your own decisions.

Property and Financial Affairs LPA

This provides the attorney with the power to make decisions about money and property such as:

Managing a bank or building society account.
Paying bills.
Collecting benefits or a pension.
Selling your property.

This LPA can be used as soon as it is registered with your permission.

A LPA should be drawn up as early as possible and registered with the Office of the Public Guardian.

Many clients draw up a Will but omit to draw up a LPA which can cause serious issues at a later date if they were to lose mental capacity.

Giving Away Assets

Given the significant costs of long term care, it is not unsurprising to find that people want to consider giving away assets to their children or other family members whilst they are healthy so that their assets are not then used for the provision of long term care.

This is a difficult area and it is possible to fall foul of the ‘deprivation of assets’ rules whereby social services believe a person has deliberately given away assets to below the funding threshold in the knowledge that they will need long term care provision. In this case, social services will include the value of the assets given away as part of their financial assessment.

It is also worth bearing in mind that social care in the UK is under enormous pressure at the current time with vacancies in 2022 standing at around 165,000 according to Skills For Care.

For those needing long term care, whether it be within their own home or in a residential or nursing home, it is often more attractive to pay for the best care possible during later life rather than have to rely on care provided by the local authority.

Summary

Life expectancy is increasing and although we want to be healthy for as long as possible often there is a gap between life span and health span. The cost of long term care is significant and should be considered as part of a wider financial planning strategy and this should include:

Planning ahead by talking to other family members about your views on long term care.
Putting in place a Lasting Power of Attorney.
Considering the different types of care you might need.
Taking into account the cost of care.
Looking at the different ways to fund long term care and factoring these into your financial plan.

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If you would like to discuss building a financial plan for your retirement and later life, please do contact us.

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Later Life – Long Term Care

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