We're currently experiencing extremely high call volumes. We're very sorry for any inconvenience this might cause.

If you need help with your account, please visit our Help Centre, or email us and we’ll get back to you as soon as we can. For more information and tips on managing your account online please visit www.hl.co.uk/coronavirus

We’re experiencing high call volumes, please check FAQs before calling.

Skip to main content
  • Register
  • Help
  • Contact us
  • Log out of your HL account

How to fund long term care

Long term care costs are expensive, and have been rising steadily year on year.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Long term care costs are expensive, and have been rising steadily year on year. With the average cost ranging from about £33,500 to £52,000 per year for a residential care home, it’s really something everyone should be thinking about.

Who pays for it?

If you have savings and assets of more than £23,250 (£27,250 in Scotland, £24,000 in Wales) then you won’t normally be eligible for local authority help and must pay for your own care, although it’s worth contacting your local authority in the first instance. If you own your own home, this might be taken into account when assessing your eligibility for local authority help.

We’ve written this article to give you useful information about finances in later life but it isn’t personal advice. If you’re not sure, please ask for advice. All investments rise and fall in value, so you could get back less than you invest. Tax rules can change and benefits depend on personal circumstances.

If you have to self-fund care, here are six ways to do it:

  1. Deferred Payment Scheme

    The local authority pays the care fees by creating a debt on the main property, they can also charge legal and admin fees. This scheme might be an option if it’s likely you’ll need to permanently move into a care home, as temporary stays aren’t eligible.

  2. Renting your property out

    Renting lets you make some income from your property while keeping it in your estate. Rental returns tend to be quite low, especially once costs like tax, insurance, repairs, management fees and periods when the property is vacant are taken into account.

  3. Equity release

    There are different types of equity release schemes.

    One of the main types is a Lifetime Mortgage. With a Lifetime Mortgage the equity release provider loans you money against the value of your property to pay for care. This option keeps the property in the estate for now so the estate can still benefit from any future growth in the house price. However the loan will have to be repaid when the property is sold, upon death or on permanently going into a care home.

    Another type of equity release scheme is a home reversion plan. This involves the equity release company buying all or part of your property from you at below market value and allowing you to live there rent free. The equity release provider then gets a proportion, or all, of the sale proceeds when it’s sold.

    Equity release schemes are high-risk products, so make sure you get specialist advice before going ahead with anything.

  4. The next three options could involve selling property and then using the proceeds to provide extra income:

  5. Keeping the money in the bank

    Cash will earn interest in the bank, but with interest rates currently less than the rate of inflation you’ll be losing spending power over time.

    So it makes sense to make the most of any cash you’ve got. Everyone should have some easily accessible cash set aside for emergencies, but for known future costs like care home fees, fixed term savings could be the answer. Fixed term savings usually pay a better interest rate than easy access savings – generally the longer you fix for the better the rate. Remember that fixed term products generally only allow access to the money at maturity.

    Find out more about how we can help you make more of your savings

  6. Investing the money

    Investing gives you the chance to make more income than cash, so it could go further towards meeting care home fees. It also has the potential to grow over time, which should help to protect against inflation.

    But this option involves taking investment risk – income and growth aren’t guaranteed. Unlike the security offered by cash, the value of investments falls as well as rises, so you could get back less than you invest.

  7. Using money to ‘buy’ an income through an immediate needs annuity

    An immediate needs annuity secures you a guaranteed lifetime income to fill any gaps in income.

    Unlike the other options, which are open-ended, an immediate needs annuity tells you at the start how much of the capital is required to cover the income shortfall. Dedicating this amount to cover the shortfall can help you manage the rest of your capital. Once set up, annuities can’t usually be changed, so please consider your options carefully.

All the support you need. Nothing more, nothing less

If this article has got you thinking, it might be worth talking to an expert. Whether it’s for yourself or a loved one, we can help.

  • Our ‘advice on your terms’ approach means we can offer an advice service and level of engagement that’s suited to you.
  • We’ll help identify if you have a shortfall to pay for care and work out a plan to meet it.
  • Our advisory team includes a number of specialists in long term care planning.

Do I need advice?

Our Bristol-based helpdesk is your first port of call. They’ll be able to explain the services we offer. We are open 5 days a week to learn about your situation.

You might find you don’t need advice, if that’s the case we’ll support you with free information to help you get on track. If you decide to proceed with advice, charges will apply. Please note, no personal advice will be given during the initial consultation.

Give us a call on 0117 317 1690, or find out more.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Daily market update emails

  • FTSE 100 riser and faller updates
  • Breaking market news, plus the latest share research, tips and broker comments

Related articles

Category: Financial Advice

A friend of a friend told me...

Your friends and family will have the best intentions when giving out financial advice but they aren't always a substitute for professional advice. Here are a few things to think about before acting on friendly advice.

Bruce Pearce

24 Apr 2019 3 min read

Category: Investing and saving

The stress-free way to secure this year’s ISA allowance

With the end of tax year fast approaching on 5 April, we take a look at a simple stress-free way to secure this tax year’s ISA allowance without the need to invest straight away.

Georgia Tivadar

03 Apr 2020 2 min read

Category: ISAs

ISAs – how much do the tax benefits really matter?

We crunch the numbers to show just how much tax an ISA could save.

Georgia Tivadar

03 Apr 2020 4 min read

Category: Pensions

The impact of dividend cuts on drawdown investors

We look at what drawdown investors could do following recent dividend cuts.

Michelle Branco

02 Apr 2020 3 min read