How YOU can get your care costs covered without running out of savings or selling your home

CARE reforms are back on the table after prime minister Andy Burnham pledged to tackle the issue in one of his first speeches as prime minister. Last week he promised to put “everything I’ve got” into fixing the social care system through a major overhaul. The soaring cost of care is a worry for thousands of people Credit: Getty We explain the steps you can take to avoid selling your home or spending all your savings Credit: Getty It’s not the first time the government has attempted to improve Britain’s broken care system – in fact reforms have been suggested 22 times since 1997, the prime minister pointed out. “To see the 23rd effort work, we need to do things differently,” he said. Sign up for the Money newsletter Thank you! Boris Johnson previously announced a plan to reform adult social care in England in September 2021, while Theresa May proposed reforms to social care funding during the 2017 general election but abandoned plans when they were dubbed a ‘dementia tax’. Andy Burnham even produced a plan for a national care service when he was health secretary in Gordon Brown’s government in 2010. Reports suggest that the Prime Minister is considering several ways to fund the reforms, including a 10% levy on estates or a new 1.8% charge on earnings. But the plans could be years away from coming into force, which will be cold comfort to those who are approaching their golden years or have older relatives. In the meantime, there is still the risk that all of their savings will be swallowed up by the cost of care. Pete Cowell, head of annuities at Standard Life, said: “Most people would rather not think about needing care later in life, but as we live longer lives it’s becoming an increasingly important part of retirement planning.” Most read in Money Here we explain how you can plan now to cover the cost of care while still protecting your wealth. How much could I be forced to pay? A place in a nursing home costs almost £66,000 a year according to Age UK Credit: Getty Privately arranged care at home can cost around £25 an hour, while residential care costs around £949 a week, according to Age UK. But if your loved one needs a place in a nursing home then the costs can soar even more. You’ll need to fork out around £1,267 a week on average, which adds up to almost £66,000 a year. But costs can vary widely across the UK, from £1,264 a week for nursing care in the North East of England to £1,759 in London, according to carehome.co.uk. Can I get any help with care costs? If you want to apply for free care then you will need to request a care needs assessment by contacting the adult social services department at your local council online or by phone. If you live in England and Northern Ireland and have more than £23,250 in savings, investments and property then you’ll need to pay for your own care without any help from the council. In Scotland the rules are slightly different as you need capital worth less than £22,750 to get maximum council support. Meanwhile, if your assets are worth more than £36,750 then you’ll need to self-fund your accommodation costs. As a result, your hard-earned cash could be eaten up by care costs – leaving you with nothing to pass on to your children or grandchildren. In comparison, in Wales there’s a more generous allowance, and you need to have capital of more than £50,000 before you need to pay for care costs. But don’t assume that you’d need to sell your home to meet the costs. If you need care services at home or to stay in a care home short term (up to eight weeks) or temporarily (generally up to 52 weeks) then the property you live in won’t be included in the financial assessment. But if you need permanent care in a care home then your property may be included in the financial assessment. If you need care in your own home then the value of your property is excluded from your council financial assessment. Meanwhile, if your partner still lives in your home then the council must ignore its value during the financial assessment. While it can be tempting to give away some of your money or possessions to avoid paying care costs, it may not help you to qualify. If your council thinks you’ve done this to dodge care fees then it may still assess you as if you still had the money or property you’ve given away. This is called a deprivation of assets. Should I invest to cover the cost? Investing little and often could help you to pay for the cost of care Credit: Shutterstock Investing could be one way to help build up a pot to pay for the cost of your care without the need to sell your home. Ian Futcher, financial planner at Quilter, said: “Many people worry that needing care could mean watching a lifetime of savings disappear that might have been earmarked for loved ones, and for many families that concern is understandable. “Planning ahead can make a significant difference, so building a dedicated pot for later-life care early is sensible.” One way to do this is to start saving now. If you set aside £30 a month from the age of 40 then you would have £64,570 saved by the time you went into residential care at the average age of 86. This sum would be just shy of the £66,000 a year you need to pay for your care. The figures assume that your investments grow by 5% a year. But if you’re not able to save this much every month then smaller sums of money could still make a huge difference. Setting aside £10 a month would leave you with a fund worth approximately £21,523 by the age of 86. However, remember to never invest money you can’t afford to lose as markets move up and down and you could be left out of pocket. Boosting your pension contributions can be a great way to invest more for your future. You receive tax relief on the money you put into your pension, which can turn an £80 contribution into a £100 if you’re a basic rate taxpayer. Meanwhile, upping your contributions may mean that your employer also increases the amount they put in. If you pay in 5% into your pension then your employer must also contribute at least 3%. But some employers will match you to a higher cap of 7% or even 10% and it can make a real difference to your pot. What about an annuity? There are several types of annuities designed to pay for care costs Credit: Getty – Contributor Annuities are a type of financial product that swaps a lump sum of money or cash from your pension for a guaranteed income for a set period of time. There are two types of annuity that can help you to afford the cost of care, an immediate needs annuity and a deferred care annuity, Ian explains. He said: “These can help limit the risk of prolonged care gradually consuming a family’s wealth.” An immediate needs annuity is a type of annuity designed to help you pay towards the cost of care . It works by providing a monthly payment to your registered care provider for the rest of your life. To get one you usually need to be over the age of 55. An 86 year old could get an income of £15,687 a year by spending £100,000 of their pension pot on an immediate needs annuity, according to Retirement Line. You can choose a guaranteed income annuity where the payments increase by a fixed percentage or in line with the Retail Price Index, which can help if care home fees increase in the future. The Retail Price Index is a metric that measures inflation by tracking the changing cost of a basket of household goods and services. One big advantage is that as the money is paid directly to your care provider there is no tax to pay on the cash. Although there’s no guarantee that these tax rules won’t change in the future. But there are disadvantages to taking out an annuity. If you take out a guaranteed income annuity but no longer need care or become eligible for NHS funding then you can’t cancel it. But you can have the cash paid directly to you, although you may need to pay income tax on it. Another option is a deferred care annuity, which is designed for people who can pay their own care fees for up to five years but want certainty that their costs are covered after this period. Some come with a money back guarantee, which means if you die within the first six months then your provider will pay out a percentage of your original premium. It will deduct any payments it’s already made from the sum. But you’ll still need to foot the upfront costs yourself, so this is not a good idea if you don’t have a lot of cash. Are there any other ways to get free care? if you have a long-term health need then you may be able to get free care Credit: Getty If you have a long-term health need then you may be able to qualify for free health and social care funded by the NHS. The NHS continuing healthcare scheme can be provided in several locations, including in your own home or a care home. The scheme isn’t means tested, so you can still get it if you own your own home. To be eligible you need to be assessed by a team of healthcare professionals, who will look at the help you need, how complex and predictable they are. Caroline Abrahams, charity director at Age UK, said: “ To be eligible, you must be assessed as having a ‘primary health need’ that requires a package of care, either in your own home or a care home or any other suitable setting. “Recipients typically fall into three categories: people at or near end of life; frail older people with complex physical or psychological needs; and people aged 18 and above with long-term healthcare needs.” You’ll usually get a decision within 28 days of an initial assessment or request for a full assessment. But just 17% of people who apply were found eligible in 2025/26, down from 31% in 2017/18, according to NHS England. Meanwhile, the number of eligible people varies widely depending on where you live. For example, just 7.3% of people in Gloucestershire were found eligible between January 1 and March 31, 2024, according to Nuffield Trust. In comparison, 42.5% of people were eligible in Leicester and Rutland. Check you're claiming all the cash available With the cost of care so high it's important to make sure that you're getting all the cash and support you are eligible for. State pension You need 35 years of National Insurance contributions to receive the full new state pension, which is currently worth £241.30 a week. You can check how much state pension you are due to receive online by visiting gov.uk/check-state-pension. If you have gaps in your National Insurance record then you can fill them by making voluntary top ups. You can typically fill gaps from the last six tax years. Pension credit Pension credit is a vital benefit that can top up your weekly income to a guaranteed minimum of £238.00 for single people and £363.25 for couples. You can start a pension credit application up to four months before you reach the state pension age. You can claim any time after you reach the state pension age but your claim can only be backdated for three months. To claim you will need: Your national insurance number Information about your income, savings and investments Your bank account details, if you’re applying by phone or by post If you’re backdating your claim, you’ll need details of your income, savings and investments on the date you want your claim to start. You can apply online via Gov.uk if you’ve already claimed your state pension or you’re not responsible for children. If not, you can apply by calling 0800 99 1234 or by printing out, completing and posting this online form. Winter fuel payment You may also be eligible for the Winter Fuel Payment, which is an annual tax-free sum to help pay for heating bills. It is worth up to £300 a year and is given to people born on or before June 28, 1960. Most people will receive the payment automatically in November or December. But if your taxable income is more than £35,000 then the cash will be recovered through the tax system. Comment now