Paying for care

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Paying for care is expensive

With care homes regularly charging anything between £800 and £2,000 p.w, and 24 hour living in care costing between £70-100,000 p.a., paying for care is very expensive and can all too quickly consume all of your savings.

Should you be paying for yours or a relative’s care, to avoid it consuming all of their money we would suggest you first:-

  1. Ensure you, or the person needing care couldn’t qualify for NHS Continuing Healthcare as this would then be totally free and is not based on how much money the person has, just whether their need for care is primarily a health need rather more than simply needing help with looking after themselves.
  2. Check your assessable assets do exceed the Upper Capital Threshold shown here and therefore have to pay for your own care and wouldn’t qualify for any financial assistance from your Local Authority. In brief – If you are single or widowed ALL your assessable assets (savings and investment including any second properties) will normally be counted and should you need care in a care home, it will also include the value of your home. Should you or the person needing care be married or in a Civil Partnership they should only count your own assets plus 50% of any jointly held bank accounts, savings or investments, not your spouse/Civil Partner’s. They should also exclude the value of any jointly owned property if your spouse or Civil Partner intends to remain living in the property.
  1. Maximise your income by ensuring you claim all the state benefits you are entitled to.
  2. Understand how much shortfall in income you will have and how much you may end up paying overtime. You can do this quickly and easily by using our instant and intuitive care fees calculator
  3. Then request your FREE care fee annuity quotes to discover how much one might cost.

How To Pay For Care?

As no one knows how long care will be required and only hindsight will tell, there is no one best way to pay for care, what you need to decide is whats most important for the person needing care, securing good quality care for however long it may be required, or trying to preserve as much money as possible for beneficiaries.

There are a number of different ways you could consider including; simply paying from savings, investing, letting any property, buying a care fees annuity, or if you need care at home – even releasing equity from your home.

So, let’s now take a closer look at each.

This “pay as you go” approach can be the cheapest and simplest method if care is likely to be required for only a short period.

The problem is – no one knows how long care will be required and whether the amount of money will be adequate?

So it’s important you appreciate just how quickly fees will erode saving and potentially end up costing, You can do this by using our care fees calculator.

Even if money is more than adequate to meet these likely future costs, you could find, especially with escalating fees, that the total amount overtime could consume more than if you purchased a care fees annuity.

Rather than just keeping money on deposit or in a current account and simply paying fees from this, if you have sufficient money, perhaps because you have already sold your former home, you could consider Investing some or most of it in assets such as shares and government bonds with the aim of receiving a larger yield, or income than you could get on deposit. This could then pay most if not all of any shortfall and potentially preserve more money for beneficiaries.  

However Investing is more volatile and carries greater risk than simply paying-as-you-go as money can go down as well as up and no investment (apart from an escalating care fees annuity) will ever guarantee an escalating income to help meet escalating care fees.

The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.

Paying for care using your home will depend on whether you want care at home, or in a care home.

Care at home – If you want care at home, and existing savings are inadequate to continue paying for the fees, providing you own your home and are older than 55 you could consider some form of equity release scheme to raise additional funds.

Equity Release schemes include Home Reversion plans and Lifetime mortgages. Both will enable you to raise additional tax-free cash and retain the right to remain living in your home, but with a lifetime mortgage you and your family will have the re-assurance of knowing you still own it.

The amount you can release will depend on your home’s value and the age of the youngest owner.

With a lifetime mortgage equity release scheme, you can choose whether to release just one single lump sum -possibly to buy an annuity, or with a drawdown plan you can request a maximum credit limit is set up to draw-down over time – perhaps to pay for carers only as required. The problem with a drawdown plan is that you may exhaust it before any need for care stops. This could then force you into having to sell and move into care.

Any money received will incur interest and could affect means-tested state benefits and any Council Tax reduction you may be receiving, but it wouldn’t affect any not Attendance Allowance or Personal Independence Payment (PIP). If married and you release equity to fund the first person’s care, it also can leave precious little or even no money for the second person should they then need care later.

So, if considering equity release, it is vital that you get specialist advice not simply from an ordinary equity release adviser but one that understand and specialises in Long Term Care. This is where we can help again.

Our Principal – Keith Hargraves has been helping families to safely release equity for over 23 years.

This is a lifetime mortgage. To understand the features and risk, ask for a personalised illustration.
 


If receiving care in a care home you will have more options, including;- being able to sell your home and either invest the proceeds to pay for care or buy an annuity.

Alternatively, you could; let it, take out an equity release scheme on it, or apply for a deferred payments scheme (see next option for further details)

Selling will obviously raise the most and give you more options for paying your care but will only be an option if no one else will remain living in it. It will also avoid having to maintain it.

However, selling may take some time and if property prices are increasing, you might prefer to look at letting it and /or applying to your local authority for a Deferred Payment Arrangement.

Letting can generate extra income and avoid you having to sell the property or pay utility bills. In a rising property market, it can also continue increasing in value.

However, for many, the income generated simply is not enough to fully fund any shortfall in income. Also depending on the condition of the property, you may have to spend considerable sums on bringing it up to lettable standards.

Being a landlord can also bring a whole host of other responsibilities and headaches which you may prefer to avoid when you will need to find other ways of funding the shortfall such as buying an annuity.

Alternatively, providing other assets are less than £50,000 if you live in Wales, £23,250 in England or £ 22,750 in Scotland (2026/7) – you could apply for a deferred payments scheme.

This is a scheme which is similar to a loan or IOU in so much as, you can ask your Local Authority to pay your fees for you until you chose to sell your home when you would then repay the debt plus interest accrued. With the Local Authority’s permission, you can also let your home to generate extra income to help minimise the debt from escalating so fast. To ensure they can recover their debt when the property is sold or the person needing care dies, the Local Authority places a legal charge on your property and will also charge interest.

A Deferred Payment Arrangement will only be offered, if:-

  • Your non-property assets are below £23,250 in England, £22,750 if you live in Scotland (2026-27) or as of (2025-26) £50,000 in Wales.
  • You have been formally assessed by your Local Authority as needing permanent care in a care home.
  • Your property would otherwise be included in any Local Authority means testing and  offers sufficient security,

In return for asking your Local Authority to pay your care fees on your behalf until you decide to sell you will need to pay most of your pension and benefits a and if you decide to let you will also need to pay them, most of your letting income (although will be allowed to retain up to £144 p.w. to cover expenses) to keep the debt down. You will also remain responsible for maintaining the property until it is sold as well as accounting to the Inland Revenue for any letting income earned.

You can read more about this by visiting deferred payments or asking your Local Authority.

These specific and very tax efficient plans help make light work of paying for either care agency or care home fees by providing a guaranteed, and if you wish, an escalating income for life in return for paying just one single premium which is based on; age and health, how much income you want it to provide, as well as whether you would like the income to escalate.

The income can be paid directly to  any care home or domiciliary care agency not only making life easier but providing they are Care Quality Commission (CQC) registered it will also benefit from being tax-free. 

Apart from being very tax-efficient, care fee annuities are also very safe as they are fully protected by the Financial Services Compensation Scheme (FSCS) with no upper £85,000 limit. The only risk is that because the premium is based on how long insurers feel they will need to pay for, should the person not require care for as long, they would lose some money.

This mortality risk can be reduced by paying slightly more and buying some premium or capital protection.

To discover more about these tax-efficient plans visit care fee annuities.

Discover how much a care fees annuity would cost

Should you find you need to pay for your own care we would recommend anyone should find out how much a care fees annuity would cost, so to help, being specialists we will obtain all initial annuity quotes for you free of charge and without obligation.

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Based on our understanding of the market as at 30/05/2025