Question 1
How can I fund long-term care fees?
For the purpose of answering this question it is assumed that the person requiring care has insufficient income to meet the cost of providing the care, even after the State has made its contribution through the relatively new Nursing Allowance (mentioned below).
Firstly there is the “pre-funded” insurance policy, where you pay a lump sum or regular premium into the policy and make a claim if you later need nursing or residential care. This if often the cheapest way of funding care, but the drawback is that if you never claim you may lose all the money that you have put into the insurance policy. There are some insurance companies, however, that link the insurance with an investment so that there is money paid to your estate if you should die without ever having exhausted the policy proceeds. This acts like an Investment Bond where the interest buys the insurance cover.
The second method of funding care is through an “immediate care” insurance policy. Here you pay a lump sum only after the need for care arises and, in exchange, you receive an income to help meet costs. This type of cover is more expensive, but it allows the cost of the care fees to be largely capped and leaves the rest of your assets safe.
Thirdly, various equity-release schemes allow homeowners to unlock capital tied up in their property, to spend on care costs or to finance insurance. These schemes received a bad name some years ago and should be checked thoroughly before proceeding.
Finally, the Scottish Executive have instituted a policy of free personal and nursing care for those that are aged over 65 and assessed as needing it. The current level of payment is £145 per week for personal care and £210 per week for nursing care. This payment, together with your pension, may cover a large part of the costs of care. The remainder could be funded by insurance or by using capital.
