The provision and funding of care

On January 3^rd  2025, the government announced the launch of an independent commission into adult social care.[1] The commission, reporting to the Prime Minister, is tasked with providing clear recommendations for how to rebuild the adult social care system to meet the current and future needs of the population. As the commission embarks on its work, it will be essential to address critical issues such as the rising demand for care driven by an aging population, funding challenges, and the need for effective management of care provisions.

The first phase, reporting in 2026, will identify the critical issues facing adult social care and set out recommendations for effective reform and improvement in the medium term. The second phase, reporting by 2028, will make longer term recommendations for the transformation of adult social care. Whilst this is a welcome move, the general opinion is that no meaningful impacts will occur until 2028.  Indeed, since 1999 there have been five commissions looking into social care considering the rising problem and producing recommendations which have never reached fruition.[2] The previous government’s planned introduction of a lifetime cap of £86,000 on personal care costs and the increase of the upper threshold to £100,000 (due October 2025) has now been cancelled. We therefore still have a broken system, and one could be forgiven for agreeing with many commentators who state that once again “the can is being kicked down the road.”[3]

In light of these ongoing challenges, it is essential to examine the current state of adult social care in the UK. This article delves into the current state of adult social care, examining the implications of an aging population, the costs of care, and the varied options available for individuals seeking support.

The effect of the increase in the UK’s senior population and provision of care

In 2021, approximately 11 million people were aged 65 or older in the UK.[4] The number of people aged 65-79 is expected to increase by nearly 30%, while those over 80 is expected to almost double in the next 40 years.[5] With the increase in care needs that come with age, the importance of residential care in the UK’s health system is undeniable. In the UK, residential care includes nursing homes, known as care homes with nursing, and residential homes, simply referred to as care homes.

The building of new care and nursing homes has increased significantly in recent years; however, the lack of experienced staff is recently becoming an issue. The cost of being a resident can be as much as £2,000 per week, with the average being around £1,160 if you are a self-funder. [6] The costs of care are generally dependent on the quality of the home and its location.

Nursing homes and care homes only account for a percentage of the population who require care. Many are looked after by their spouses and family members in their own homes or move to live with their families. Others choose to have live-in care as a preference to moving out of their home which can be both a psychological wrench as well as having an adverse effect on wellbeing. Vulnerability can quickly become an issue not only for those who require care but also for those caring for the individual who suddenly find that they have become unpaid and, in the greater percentage of cases, inexperienced carers. The need for and arranging care can become a stressful and bewildering experience for all concerned with many having little knowledge or experience of what to do for the best and how costs can be met.

Local authority Social Care funding is available following means testing for which the upper threshold in England of £23,250 has now been frozen for the past 14 years and yet the cost of care has continued to rise considerably  over the same period.[7] Between 2021 and 2023, care home costs rose by 19%.[8] NHS Continuing Healthcare which provides total care funding remains available, but eligibility rates continue to fall. For instance, one has to be in extremely poor health to qualify.

As Former Senior Fellow for The King’s Fund, Richard Humphries, surmises, “Who pays for what across health and social care is confusing and incoherent. Reform has been made harder because of the fragmented way the social care system has evolved, leaving a system that is criss-crossed with fault lines between NHS and local authority social care, private and public funding, and private and public delivery.”[9]

Planning for care

Without a doubt there are many who keep their fingers crossed and hope the need for care will not happen to them. Sadly, the fact remains that although we might live for longer this does not always go hand in hand with good health, leading to the need for care at some stage.

How can you plan, and more importantly, what are the rules and what assistance is available?

One benefit that is currently available to all who have the need for some form of care or assistance, and which is not means tested is Attendance Allowance.  Attendance Allowance helps with extra costs if you require someone to help look after you. This is paid at a current weekly rate of either £72.6 or £108.55 depending on state of health. [10] It is paid every four weeks in the same way as the state pension.

Moving to more suitable accommodation

Later life living options may include moving home and using the proceeds from the sale of your property to live in sheltered housing or retirement villages where there is a level of monitoring of residents’ wellbeing with some organisations providing increased level of support as and when the need arises. In general, the annual overheads at retirement villages sometimes classed as maintenance charges can be high but they are a great option depending on the individual.

Remaining at home

For those who elect to remain in their home, local authority grants for modifications and assisted devices to make the home more manageable to live in may be provided following an assessment by the authority’s occupational therapy department. Thereafter, a programme of attendance by appointed carers would be arranged but the funding will not be met by the local authority if your assets are above the £23,250 figure. The value of your property would be taken into consideration should sufficient liquid funds be below £23,250, with local authority loans provided against the value of your property. These loans would be available at a relatively low interest rate, the loan would become repayable when the property is sold.

Alternatively, members of the family may be relied upon for regular visits and assistance. This would of course only be possible if close family members lived nearby. Relatives or individuals who provide care for over 35 hours per week can apply for Carer’s Allowance of £81.90 per week , but this is in most cases dependant on other income. For example, if they are in receipt of a state pension of more than £81.90 per week they will not qualify for Carer’s Allowance.[11]

24/7 Live-in Care

For those who wish to remain in their home as opposed to moving into a Residential Home or Care Home the alternative to consider is 24/7 live in care. Care will be provided day and night with the live-in care being entitled to a minimum of a two-hour break for alternative cover will be necessary. Carers will normally rotate after a two-, three- or four-week period, so there could be two or maybe more carers involved. The cost of live-in care would in most cases be less or equivalent to that of a care home[12] but this will be in addition to the normal cost and overheads of running the family home. One point to note is that the majority live-in carers are typically unqualified to administer medication, therefore for somebody who has cognitive issues and requires assistance with medication a live-in care option may not be suitable.

Moving to a Nursing Home or Care Home

Moving to a nursing home or care home can at times become saddening for the new resident and their family. I have experience of people who do view this as a last resort, while others thoroughly enjoy their new environment and the renewed level of care and attention they receive.

As mentioned earlier, the average cost can be £2,000 per week and those who have assets above the £23,250 limit will be classed as self-funders. If money runs out, then cost of meeting the care is borne by the local authority provided that the needs meet that authority’s eligibility assessment and personal budget cap which varies depending on the authority. Self-funders in general pay approximately 41% more in fees for places in the same care homes than those who are funded by the local authority.[13] There also remains the possibility that a local authority is not willing to meet the fees of the chosen home.

Here is one such example of this occurring, “Brighton and Hove City Council told a woman’s family she would have to move to a cheaper care home when her money ran out, without assessing whether moving would harm her, the Local Government and Social Care Ombudsman has found.” [14]

Funding the cost of care

Clearly, having to meet the cost of care can become a very emotive subject. Many feel that they have been let down by the State who promised to look after them in their old age in return for National Insurance contributions paid and other taxation. Unfortunately, the system now faces a challenge with more individuals withdrawing funds than contributing to it.

A few words of warning

Careful consideration should be given before transferring assets in later life to avoid these being included within means testing calculations. Local authorities have the right to check all gifts that have been made in previous years, and should they judge that such payments have been made to avoid meeting the cost of care, they will be classed as being a deliberate deprivation of funds and the authority has the right to demand that such money is repaid. This can be a complex area, so speaking to a financial adviser is important.

However, should it be proven that any gifts or similar actions such as placing money into trust were part of legitimate financial planning for reasons such as estate planning, and these transactions were made at a time when there was no indication that care would be required, repayment cannot be demanded.

In addition, be cautious with investments that carry an element of life insurance when it comes to means testing.

“One asset that is listed as being disregarded is the surrender value of any life insurance policy (or annuity), although paragraph 53 of Annexe B of the guidance encourages local authorities to obtain legal advice with regard to the treatment of investment bonds.”[15]

Local authorities can exercise their right to obtain legal advice concerning such policies. I am aware that there are authorities who will not disregard these investments and will include them within their means testing calculations.

Ways of funding care costs

There are several options to help fund care, some of these include:

• Funding by NHS Continuing Health Care.[16] This is generally exceedingly difficult to obtain, which I can confirm through personal experience. If granted, it will be due to an anticipated short life expectancy.

As a self-funder

• Fund out of income. If there is substantial pension income, it may be sufficient to meet the cost of care by this means alone or when added to investment income.
• Rent out property. This could be an option to combine rental income with other income.
• Sell property. After selling the property, the proceeds could be invested in a variety of ways to provide the income to meet care costs.
• Equity release. This is a form of a mortgage that provides a fund which can be drawn upon to meet care costs. Interest will roll-up, and when the property is eventually sold the lender is repaid.
• Immediate care Annuity. Worthy of consideration is using a portion of capital to purchase this annuity to provide a guaranteed tax-free income for life, which is paid directly to the care provider, be that a care home or 24/7 live-in care provider. The income provided will depend on age, sex and state of health.

Within this article I have tried to provide a brief insight into care, the current situation and legislation (which is of course subject to change), the options for later life living and care, and how it could be funded. This is intended to be a guide which hopefully provides a pathway for approaching this complicated and very emotive subject.

I would always recommend that professional advice, both legal and financial, is sought and that unless there is any particular reason why not, options and actions are discussed with family members. Members and associates of the Society of Later Life Advisers (SOLLA) are likely to be the best place to provide advice and guidance.