At a glance

  • While the need for later-life care may seem a long way off, it's important to take into account the potential costs when you are preparing for retirement
  • Residential care fees are rising above the rate of inflation, reaching around £1,000 a week in some cases
  • If you require help from the local council, any financial assistance will be means tested
  • Giving away assets may be viewed by the council as deliberate deprivation, which may mean you do not qualify for help

At a glance

  • While the need for later-life care may seem a long way off, it's important to take into account the potential costs when you are preparing for retirement
  • Residential care fees are rising above the rate of inflation, reaching around £1,000 a week in some cases
  • If you require help from the local council, any financial assistance will be means tested
  • Giving away assets may be viewed by the council as deliberate deprivation, which may mean you do not qualify for help

At a glance

  • While the need for later-life care may seem a long way off, it's important to take into account the potential costs when you are preparing for retirement
  • Residential care fees are rising above the rate of inflation, reaching around £1,000 a week in some cases
  • If you require help from the local council, any financial assistance will be means tested
  • Giving away assets may be viewed by the council as deliberate deprivation, which may mean you do not qualify for help

The cost of residential care is rising well above the rate of inflation. According to LaingBuisson's Care Homes For Older People report, which contains data through 2019, the average weekly cost of residential care in the UK is £651, and one-to-one nursing home care can cost close to £1,000 a week. In 2019, costs rose by 5%, compared with an annual rate of inflation of 1.5%. 

Financing long-term care for yourself or a family member is a big commitment, and while it may seem a long way off, you should take into account the potential costs when you are preparing for retirement.

It's also important to note that while some financial assistance may be available from your local council, it will be means tested. This will take into account your assets (home, savings and investments) and income to determine whether you are eligible. 

How to fund a potential care home bill

If you are in your 50s or 60s when you retire and in good health, the prospect of needing care may seem a distant prospect. Nevertheless, for most people, their workplace pension, self-invested personal pension, a pension they have accrued via an auto-enrolment scheme at work, plus any assets or property they own may be needed to fund residential or home nursing care in their later years.

To work out how much you will need to cover this period, you will need to factor in the costs you will no longer have when you are not working (commuting, work clothes, lunches out, transport) alongside the cost of being retired (new hobbies, travel and more time to socialise). Of course, it's also important to account for – and protect against – unexpected costs, as well as care needs in your later years.

Pension freedoms now mean people older than 55 can draw an income from their pension without buying an annuity. How much of your pension pot you need, and how much you therefore need to save for retirement, will depend on your desired post-retirement standard of living. Will you want to have an income equivalent to your current income or salary? Do you plan to downsize and therefore have lower running costs for a smaller house? All these are important considerations as you decide how much you need to retire as a couple or as a single person.

What happens if you need care?

If you end up needing residential care, the local authority will carry out an assessment to decide how much you should pay towards your care. If you have wealth over a certain amount and you do not qualify for nursing care support, you will usually have to pay care fees in full.

It is therefore not surprising that people in failing health can sometimes be tempted to offload assets – money, property or income – in order to meet the means test. But if you or somebody you know is thinking about doing this, be warned. Councils have the power to claw back money provided for care fees if they believe you should have paid, even if you no longer have the money.

Giving assets away deliberately to avoid paying fees is known as deprivation of assets. The local authority will look at when you gave away assets and see if, at the time, you could reasonably have expected to need care and support. It must decide whether you intentionally reduced your assets to avoid paying care costs based on all the case facts and clear reasons. If it deems that you did, then it may decide to challenge you.

If you give away assets when you are healthy and at a time when you could not have anticipated care home costs, then the council will not be allowed to include them in its assessment. It also has to establish that paying for care was a keen reason for you disposing of those assets.

Disposal can include giving gifts, donating to charity, transferring ownership of your home to someone else (even if you continue to live in it) and excessive spending.

As in this and many other cases, local authorities can sometimes get it wrong, but those mistakes merely underline that this can be a complex area.

In summary

When you are planning for retirement, it is helpful to set goals and make some estimates of how much money you will need for each stage of your retirement – when you first retire, the middle years, and when you are older and perhaps in need of more help. Financial advice can be useful in order to work out how much you should be saving for your pension, how you can use pensions freedoms to maximise your opportunities in retirement, and the best options for covering care costs.

The cost of residential care is rising well above the rate of inflation. According to LaingBuisson's Care Homes For Older People report, which contains data through 2019, the average weekly cost of residential care in the UK is £651, and one-to-one nursing home care can cost close to £1,000 a week. In 2019, costs rose by 5%, compared with an annual rate of inflation of 1.5%. 

Financing long-term care for yourself or a family member is a big commitment, and while it may seem a long way off, you should take into account the potential costs when you are preparing for retirement.

It's also important to note that while some financial assistance may be available from your local council, it will be means tested. This will take into account your assets (home, savings and investments) and income to determine whether you are eligible. 

How to fund a potential care home bill

If you are in your 50s or 60s when you retire and in good health, the prospect of needing care may seem a distant prospect. Nevertheless, for most people, their workplace pension, self-invested personal pension, a pension they have accrued via an auto-enrolment scheme at work, plus any assets or property they own may be needed to fund residential or home nursing care in their later years.

To work out how much you will need to cover this period, you will need to factor in the costs you will no longer have when you are not working (commuting, work clothes, lunches out, transport) alongside the cost of being retired (new hobbies, travel and more time to socialise). Of course, it's also important to account for – and protect against – unexpected costs, as well as care needs in your later years.

Pension freedoms now mean people older than 55 can draw an income from their pension without buying an annuity. How much of your pension pot you need, and how much you therefore need to save for retirement, will depend on your desired post-retirement standard of living. Will you want to have an income equivalent to your current income or salary? Do you plan to downsize and therefore have lower running costs for a smaller house? All these are important considerations as you decide how much you need to retire as a couple or as a single person.

What happens if you need care?

If you end up needing residential care, the local authority will carry out an assessment to decide how much you should pay towards your care. If you have wealth over a certain amount and you do not qualify for nursing care support, you will usually have to pay care fees in full.

It is therefore not surprising that people in failing health can sometimes be tempted to offload assets – money, property or income – in order to meet the means test. But if you or somebody you know is thinking about doing this, be warned. Councils have the power to claw back money provided for care fees if they believe you should have paid, even if you no longer have the money.

Giving assets away deliberately to avoid paying fees is known as deprivation of assets. The local authority will look at when you gave away assets and see if, at the time, you could reasonably have expected to need care and support. It must decide whether you intentionally reduced your assets to avoid paying care costs based on all the case facts and clear reasons. If it deems that you did, then it may decide to challenge you.

If you give away assets when you are healthy and at a time when you could not have anticipated care home costs, then the council will not be allowed to include them in its assessment. It also has to establish that paying for care was a keen reason for you disposing of those assets.

Disposal can include giving gifts, donating to charity, transferring ownership of your home to someone else (even if you continue to live in it) and excessive spending.

As in this and many other cases, local authorities can sometimes get it wrong, but those mistakes merely underline that this can be a complex area.

In summary

When you are planning for retirement, it is helpful to set goals and make some estimates of how much money you will need for each stage of your retirement – when you first retire, the middle years, and when you are older and perhaps in need of more help. Financial advice can be useful in order to work out how much you should be saving for your pension, how you can use pensions freedoms to maximise your opportunities in retirement, and the best options for covering care costs.

The cost of residential care is rising well above the rate of inflation. According to LaingBuisson's Care Homes For Older People report, which contains data through 2019, the average weekly cost of residential care in the UK is £651, and one-to-one nursing home care can cost close to £1,000 a week. In 2019, costs rose by 5%, compared with an annual rate of inflation of 1.5%. 

Financing long-term care for yourself or a family member is a big commitment, and while it may seem a long way off, you should take into account the potential costs when you are preparing for retirement.

It's also important to note that while some financial assistance may be available from your local council, it will be means tested. This will take into account your assets (home, savings and investments) and income to determine whether you are eligible. 

How to fund a potential care home bill

If you are in your 50s or 60s when you retire and in good health, the prospect of needing care may seem a distant prospect. Nevertheless, for most people, their workplace pension, self-invested personal pension, a pension they have accrued via an auto-enrolment scheme at work, plus any assets or property they own may be needed to fund residential or home nursing care in their later years.

To work out how much you will need to cover this period, you will need to factor in the costs you will no longer have when you are not working (commuting, work clothes, lunches out, transport) alongside the cost of being retired (new hobbies, travel and more time to socialise). Of course, it's also important to account for – and protect against – unexpected costs, as well as care needs in your later years.

Pension freedoms now mean people older than 55 can draw an income from their pension without buying an annuity. How much of your pension pot you need, and how much you therefore need to save for retirement, will depend on your desired post-retirement standard of living. Will you want to have an income equivalent to your current income or salary? Do you plan to downsize and therefore have lower running costs for a smaller house? All these are important considerations as you decide how much you need to retire as a couple or as a single person.

What happens if you need care?

If you end up needing residential care, the local authority will carry out an assessment to decide how much you should pay towards your care. If you have wealth over a certain amount and you do not qualify for nursing care support, you will usually have to pay care fees in full.

It is therefore not surprising that people in failing health can sometimes be tempted to offload assets – money, property or income – in order to meet the means test. But if you or somebody you know is thinking about doing this, be warned. Councils have the power to claw back money provided for care fees if they believe you should have paid, even if you no longer have the money.

Giving assets away deliberately to avoid paying fees is known as deprivation of assets. The local authority will look at when you gave away assets and see if, at the time, you could reasonably have expected to need care and support. It must decide whether you intentionally reduced your assets to avoid paying care costs based on all the case facts and clear reasons. If it deems that you did, then it may decide to challenge you.

If you give away assets when you are healthy and at a time when you could not have anticipated care home costs, then the council will not be allowed to include them in its assessment. It also has to establish that paying for care was a keen reason for you disposing of those assets.

Disposal can include giving gifts, donating to charity, transferring ownership of your home to someone else (even if you continue to live in it) and excessive spending.

As in this and many other cases, local authorities can sometimes get it wrong, but those mistakes merely underline that this can be a complex area.

In summary

When you are planning for retirement, it is helpful to set goals and make some estimates of how much money you will need for each stage of your retirement – when you first retire, the middle years, and when you are older and perhaps in need of more help. Financial advice can be useful in order to work out how much you should be saving for your pension, how you can use pensions freedoms to maximise your opportunities in retirement, and the best options for covering care costs.

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