Over the years, there have been rumours and misunderstandings regarding care in later life and who pays for it. As we get older we may be faced with whether we need to sell our house to pay for care. In this article, you can expect us to clear up the rumours, myths and misunderstandings for you. In addition, you’ll learn the scenarios that an authority would expect you to sell your home.
Have you found yourself in a situation where you are expected to sell your home to pay for care costs? It is important for you to remember that you still have several options.
Life expectancy in the UK
As you can see from the following graphs, the UK has an ageing population. This age shift is placing enormous pressure on healthcare budgets and the availability of care home facilities. Due to a mixture of advances in medical technology and healthier lifestyles, the general trend for life expectancy continues to rise.
Recently, due to a mixture of increased poverty and Covid deaths, the chart on life expectancy has flattened somewhat. However, when we return to some kind of normality, experts predict it will revert to a gradual rise.
Life expectancy at birth for males and females, UK,
between 1980 and 1982 and 2018 to 2020
UK population by age
The following graph shows the UK population by age group. These are based on figures for 1966, 1991, 2016 and projections for 2041 and 2066. Those aged between 16 and 64 are the largest age group on the graph by far. However, there has been a significant increase in the number of people aged 65-74, 75-84 and 85 and above. This trend is set to continue for many years, and the government’s graph perfectly illustrates the growing elderly UK population.
Population by age group, selected years, UK
Areas most impacted by the UK’s ageing population
It is safe to say that the proportion of the population aged 65 years and above varies across the UK. The following graph illustrates areas set to experience a significant increase in those aged over 65. The most affected areas are the north-east and south-west of England, north of Scotland and Wales. Again, this prompts the question of healthcare in later life and who will foot the bill for the cost of care home residency. Could you be forced to sell your house to pay for care?
Proportion of the population aged 65 years and over, 2016 and 2039, UK
Average cost of care homes in the UK
According to information provided by Carterwood, there is a considerable divergence in the cost of residential care homes and nursing care homes in different areas of the UK. For clarity, residential care homes provide residency with basic medical services. Nursing care homes provide residency with specialist nursing staff.
The following table illustrates the significant differences in self-funded care home fees in 2020:-
It is important to remember the above figures are from 2020 and will have seen a significant increase since then. Using the above information, the annual cost of weekly residential care homes in the UK varies between £38,116 and £53,612. When looking at nursing care homes, the figure ranges between £46,384 and £66,092.
Do you have to sell your house to pay for care?
Before we look at who pays for the cost of care in later life, it is essential to differentiate between care in your home, short/temporary visits to a care home and a full-time move into a care home.
Care in your home and temporary visits to a care home
While these services are means-tested, they do not consider the value of your home. If you have savings/funds available above £23,250, you are likely to be forced to pay the total cost of care.
Those with savings of between £14,250 and £23,250 will be asked to contribute on a sliding scale. However, those with savings of less than £14,250 won’t be expected to contribute towards their care costs. This threshold varies in Wales and Scotland.
Full-time move into residential/nursing care home
If you move into a residential/nursing care home full-time, you will be subjected to the same means test as noted above. Unfortunately, if the move is permanent, the value of your home would be taken into account, and you may be forced to sell house to pay for care costs. However, there are some scenarios where your home may not be included.
The value of your home will not be included in your means test where it is occupied by:-
- A partner/former partner
- An estranged/divorced partner, where they are a lone parent
- A relative aged 60 or over
- A disabled relative
- A child of yours aged under 18
Unfortunately, while not the easiest subject to discuss with friends and family, it is vital to plan ahead if you foresee the need for residential/nursing care home services in the future.
Timescale to sell house to pay for care costs
If you make a permanent move into a care home and your property is included in the means test calculation, you have 12 weeks of grace to decide what to do. Some of the options include:-
- Arrange for fees to be paid by alternative sources of income
- Arrange a deferred payment agreement with your local council
- Equity release
- Sell your home as quickly as possible
During these 12 weeks, if your other assets/savings are less than £23,250, you may qualify for short-term assistance with fees from your council. However, if you have assets/savings of at least £23,250, you would be expected to cover your care home fees in full from day one.
Alternative sources of income
For many people, the idea of selling their home to pay for care in later life is heart-breaking. Plans to leave their home, savings and other assets to their family and friends are scuppered. While there are short-term options, many people who move to a care home on a long-term basis will eventually have to sell house to pay for care. Some of the short-term options include:-
- Using existing savings
- Cashing in investments
- Selling alternative assets
It is essential to take professional financial advice if you are faced with what can be substantial long-term care costs.
Deferred payment agreement with local council
Some local councils offer a deferred payment scheme which means that the council will cover the short, medium or long-term cost of your care. In exchange, they will take a legal charge over your home and be reimbursed with costs incurred when the property is sold. However, as the cost of care home residency continues to rise, the criteria for the deferred payment scheme will likely tighten.
If your home is included in the means test, it may be sensible to look at equity release to pay for your care home costs. As the vast majority of those over 65 will have limited income, they would likely fail a traditional mortgage affordability test. However, there are ways in which you can release capital, such as:-
- Selling part of your home under a home reversion scheme
- Entering an equity release scheme where interest is rolled up and repaid on the sale of your home
There are various costs and interest charges to consider with equity release, and again it is essential to take professional financial advice.
Selling your home for cash
Here at Cash House, we offer to buy houses for cash where the owner is looking at a relatively quick sale at a competitive price. When you consider that the average house sale takes around nine months to complete, this can be anywhere between four and six weeks with a cash purchase. We also cover legal fees associated with the sale and have a team of experts on hand ready to begin work immediately.
It is useful to see the benefits of a cash purchase which are highlighted by the following illustration:-
As you can see, various costs associated with a traditional property sale are reduced or eliminated with a cash buyer. This will also avoid chains, delays and what many people will experience, the collapse of a sale. Even with a six-week settlement timetable, settlement is well within the scope of the 12 week grace period offered by local authorities.
Tempted to help out a friend or family member with care home costs?
As the cost of care home residency continues to rise, many people are tempted to help out friends and family members with care home costs in the short term. Even though this type of offer is made with the best intentions, you need to be very careful. There may be potential consequences.
We have heard instances of those assisting with short-term costs, perhaps awaiting the sale of a home or alternative assets, being drawn into the equation. While maybe not one of the more recognised local authority policies, you may be held at least partially liable for future costs if you offer assistance in the short term. Beware!
Government reforms are on the way
The UK government is currently undertaking a root and branch reform of adult social care funding in England/wider UK. There are plans to introduce an £86,000 cap on individual care liabilities and increase the threshold for financial assistance. The threshold would rise from £23,250 up to £100,000. However, government budgets are under extreme pressure due to Covid, and the rising cost of care home services. Will the government be able to deliver on its aspirations?
As the cost of residential/nursing care homes continues to rise, more people will be held responsible for future care costs. So, unfortunately, even though many of us hope to leave our homes and assets to friends and family upon our demise, we may be forced to sell the “family silver”.
The 12 week grace period offered by local authorities before deciding what to do with your home, and additional assets, is relatively short. When you consider that a traditional house sale could take up to 9 months from start to finish, there is growing interest in cash buyers. Cash House is an established investor in property, offering competitive rates and relatively short settlement timescales. If you are looking to sell your property as quickly as possible, please feel free to contact us, and we can discuss your situation in more detail.