Paying for care Care home fees, price increases and funding caps

The average cost for care in a care home can seem like a post code lottery with fees varying considerably depending on where you live. Currently, if you are anywhere north of London you can expect to pay around £800 per week for a placement in a basic residential care home, and around £1000 per week if that also includes nursing care.

That said, some high-end, luxury care homes can charge anything from £1500 to upwards of £1700 per week, which includes the cost of living in a luxury environment, superior dining and hospitality, onsite amenities such as restaurants and hairdressers and beauticians, plus a host of enrichment activities both inside and outside the home. For those residents who can afford these fees it is more a lifestyle choice, to live in a five-star environment with the reassurance of round-the-clock care.

However, as you cross the North-South divide and draw closer to London and the South of England the fees start to rise exponentially, with the average cost of a care home at £1118 for residential care and around £1476 for dementia care.

Spiralling care home fees

With the current UK inflation rate at almost 7%, the economic crisis has hit the care industry particularly hard, with many privately-run care homes having to pass their rising costs on to their residents or risk closure. This comes as analysts fear an impeding recession as the Service Sector struggles with its sharpest monthly fall of private sector activity, outside of the COVID pandemic.

Amidst this one must remember that care providers are exposed to the same inflationary pressures as other business. Two of the biggest strains affecting the industry are soaring energy prices and rising staff costs – both of which have been exacerbated by the current economic crisis.

Care cap 2025

In 2021 the government set out its new plan for adult social care reforms in England. Part of this plan was to introduce a cap of £86,000 on the amount anyone will need to spend on personal care over their lifetime, which was supposed to take effect from October 2023.

However, a U-turn in August 2023 by the Prime Minister meant the proposals will not be implemented now until October 2025.

The key changes to take place as part of the plans are:

1. To introduce an £86,000 limit on the amount an individual has to spend on personal care costs over their lifetime.
2. An increase in the upper and lower capital thresholds for means-tested social care funding to £100,000 and £20,000.

Presently the upper limit on adult social care is £23,250 and the lower limit is £14,250. This means if you net assets are more than £23,250 and you do not qualify for NHS support then you will have to pay for your care in full.  And if your assets are below the lower bracket then the local authority will step in and cover the costs.

Equity release, downsizing, finding solutions to cover care costs

Knowing when to start planning for later life care, for a loved one or for yourself is something that will help ease the pressure of care costs further down the line. As well as the emotional connotation, moving into a care home no doubt comes with its financial liabilities and implications and it is important to consider how you will fund future care.

Some care seekers may be eligible for local council or NHS funded help towards the cost of care, however a large proportion of people are self-funded either partly or in full.

As the funding process is means tested it is important for anyone thinking about ‘giving away’ assets including their home or cash lump sums, to a relative for example, to tread carefully as they could fall foul of the ‘deprivation of assets’ rule. This is where you intentionally reduce your assets in an effort to seek greater local authority funding.

As part of the planning process many financial advisors will advise on updating wills as early as possible, setting up lasting power of attorneys, and in some cases inheritance tax planning.

There are also a number of equity release products on the market which can help generate funds from a property, without the need for outright selling it.

At Cinnamon Care Collection we are partnered with a number of independent financial advisors who can offer impartial advice on funding later life care. A number of our care homes also hold regular Care Funding Seminars, get in touch with your nearest care home and ask about a Care Funding Seminar.