As we live longer, many of us will need a little bit more support as we get older. Whether it’s for you or your parents, social care is a sensitive subject that can lead to many sleepless nights. Everyone wants to know they’ll be supported in later life, but many are unaware how much this care might cost.
Often described as a political football, social care is the new pensions. The goalposts can easily change with each new parliament, as politicians try to balance the cost of caring for an ageing population that isn’t saving enough.
This leaves Brits confused over how to prepare for their future – just like saving for retirement. It can sometimes feel easier to bury your head in the sand.
Health and social care can also often get mixed up; whilst health care is funded through taxes but free at the point of use, Brits are expected to pay for social care after being means tested.
It can be difficult to identify the difference between the two, which can have a crucial impact on family finances. Generally, health care covers the treatment and controlling of an illness, disease or injury, whilst social care can include getting someone out of bed, helping them get to work, or supporting them at mealtimes.
Means testing social care
After assessing what support is needed, the local authority will work out how much they will charge the person needing care – whether it’s day care, home care, or moving into a care home.
The means test values the total income from pensions, benefits or earnings, as well as savings, investments, property and business assets. How much income and capital a person who needs care has determines how much they will pay.
Whilst some people don’t pay a thing or have their care costs subsidised, others are required to pay for everything if they move into a care home and have over £23,250 in savings.
Property is included as ‘capital’ in the means test unless a partner or dependent relative lives there, or the person receives respite care for under 12 weeks. Deferred payment agreements are available to those whose money is tied up in property. The local authority will delay care cost payments until a property is sold later down the line.
How much could care cost me?
The cost of social care varies across the UK, depending on the local council. In Hertfordshire, for example, home care costs just under £19 an hour and full day care costs £41 – that could cost £1,150 a month including weekends¹.
A single room in a care home could cost £420 a week, which jumps to just under £500 a week for people who need a bit more support. Add in crucial dementia services and fees increase to around £575 a week – that’s £29,900 a year.
The government has currently put the brakes on a £72,000 cap on social care costs and reform of the means testing procedure until 2020. To highlight just how expensive social care can be, this £72,000 cap will halt care costs after just 36 months in a residential home in Hertfordshire.
Strip away the politics and social care is an emotive issue for those that need care and their families. Whether it’s a helping hand getting to work, rehab after an accident, or residential care, everyone needs the reassurance that they’ll get the support they need if the time ever comes.
Life comes with competing priorities, and preparing for the cost of this support, whether it’s for you or a family member, may not compare to bringing up a family, moving into your first home and preparing for retirement.
In difficult times like these, money is the last thing you want to think about. Instead, it’s about being there for your family member when they are giving up their independence.
The following five tips won’t solve everything, but they might help make the prospect of affording any care later in life less daunting, so you can focus on the things that matter.
Make your money work harder
Inflation can eat into the value of money sat in cash savings accounts, so you might want to think about protecting your money and growing it for the future, by investing it. The value of your investments can go down as well as up, but with interest rates at record lows your money needs to work harder.
Whether you’re only able to earmark a small part of your monthly income each month, or dedicate your annual bonus, the earlier you start the better.
Not only will your money have a longer time invested, but you can also benefit from compounding – where your returns earn their own returns. This is arguably one of the most powerful forces when investing.
Know your investor profile
Knowing your investor profile is one of the first steps to achieving your future goals – that means understanding what you’re investing for and when you’ll need your money.
You might be investing for a future that’s 50 years away, or a little sooner for your parents. Your time frame dictates how much risk you can take on when investing. Investing in the right way for you means you can sit back and think about the things that are important, instead of worrying about the performance of your investments.
Putting all your money on one investment is never a good idea – no matter how confident you feel you know how things will play out.
By spreading your money across investments and asset classes, you can manage the risk in your portfolio and aim to offset any losses with gains made elsewhere.
Live in the present
Managing your portfolio takes time and skill – things the modern family don’t often have. That’s why low-cost, hassle-free investing solutions are so important to British families, especially when priorities start competing.
- Paying for your care costs, Hertfordshire County Council