Even if you’ve paid National Insurance contributions all your life, you might have to pay towards your long-term care. Find out how the costs are calculated and whether you’ll have to pay..
Working out who is going to pay for long-term care
National Insurance contributions go towards things like your State Pension, but not the costs of social care.
Your local authority manages this type of care. So you have to apply to them if you need help with paying for long-term care.
Your local authority (or Health and Social Care Trust in Northern Ireland) will first carry out a care needs assessment to find out what support you need.
Find out more in our How a local authority care needs assessment works guide.
The next step is to work out who’s going to pay. Your local authority might pay for all of it, part of it or nothing at all.
Your contribution to the cost of your care is decided following a financial assessment. This is called a means test.
How does a means test work?
A means test looks at:
- Your regular income – such as pensions, benefits or earnings. You’ll normally be expected to use part of your income to help pay for the care. Although some income will be disregarded, such as your earnings from any paid work you do.
- Your capital – such as cash savings and investments, land and property (including overseas property), and business assets. If your capital is above a certain threshold, you’ll have to pay the full costs of your care yourself. If your capital is below that threshold but above a lower limit, it’s taken into account by assuming it produces an income (called the ‘tariff income’) at a set rate. And any income from the capital is ignored.
If you’re a homeowner
If you own your own home and still live there, its value isn’t included in the means test.
If you move permanently into a care home, the value of a home you own (or your share of it if you own it jointly) might be counted as capital after 12 weeks.
However, your home won’t count as capital if certain people still live there. They include:
- your husband, wife, partner or civil partner
- a close relative who is 60 or over, or incapacitated
- a close relative under the age of 16 who you’re legally liable to support
- your ex-husband, ex-wife, ex-civil partner or ex-partner if they’re a lone parent.
“Dad was really worried he’d have to sell the house when mum went into care for her Alzheimer’s. But because he was still living in the family home, the council didn’t include it in their calculations.” – Fiona
Your local authority or trust might choose not to count your home as capital in other circumstances. For example, if your previous carer lives there and they gave up their home to care for you.
If your home does count as capital, you can opt to make a deferred payment agreement with the local authority. This means instead of paying your share of the care costs immediately, the local authority effectively lends you the money and the debt is repaid when your home is eventually sold.
If you decide to rent out your property, its value is treated as capital. For the purpose of the means test, the rental income is ignored. However, you could choose to pay the income to the local authority to reduce your debt if you have a deferred payment agreement.
Find out more in our Deferred payment agreements for people who own their own home and are moving into a care home guide.
Means tests for different types of care
Care home means test
If you’re moving into a care home and have capital that is more than the amount shown in the middle column of the table below, you’ll usually have to pay all the care home fees.
If your capital is no more than the amount shown in the last column, your capital will be disregarded.
These thresholds include the value of your home unless your partner or another dependant still lives there.
In between the two thresholds, your capital will be assumed to produce a ‘tariff income’. The amount of tariff income is assumed to be £1 a week for each £250 of capital you have above the lower threshold.
For example, suppose you live in Scotland and have capital of £25,100. The first £18,000 of your capital is disregarded. The remaining £7,100 is divided into £250 chunks (treating the odd £100 as a complete chunk). There would be 29 chunks, so you would be treated as receiving £29 a week from your capital.
Any income from your capital is ignored. But the tariff income is added to your income before working out how much you have to contribute.
If the means test reveals the local authority should pay for your care home place you’ll have to contribute all your income (including the tariff income), minus a small amount of money you’re allowed to keep for personal expenses.
Care at home means test
If you receive care in your own home, the means test works as described above, but with these differences:
- The value of your home isn’t taken into account when working how much you have to pay.
- You’re allowed to keep a much higher amount of income so you still have enough to pay your bills and to live on.
Each local authority should publish and make available details of its charging policy for home care, how they work out how much to charge you and how much you’re allowed to keep for your own use.
There are also some national differences. In Wales for example, there’s a cap on the maximum you’ll have to pay. While in Scotland, care services are free up to a specified limit.
|Region||Upper savings threshold for any local authority funding in 2020-21||Lower savings threshold for maximum local authority funding in 2020-21|
|Wales||£24,000 (care at home) or £50,000 (care in a care home)||£24,000 (care at home) or £50,000 (care in a care home)|
Do I have to pay towards my partner’s care costs?
If your partner needs care, any savings or assets that belong just to you won’t be taken into account.
However, if you hold the savings or assets jointly with your partner – for example cash in a joint savings account – their share will be taken into account in the means test.
Local authorities will treat you and your partner as having equal shares in the savings or assets unless you can show that you own more or less than half.
You might be tempted to rearrange which of you owns the savings or assets or to spend some of your savings – to bring them below the thresholds shown in the table and so get more funding from your local authority.
Be careful of doing this. The ‘deprivation of assets’ rules mean that the person needing care can be treated as still owning capital that they have given away or spent if the motive was to reduce their contribution towards their care costs.
For example, if the person needing care transferred some savings from their sole name into a joint account with you, they would be making a gift of half the savings to you. But the local authority could treat them as still owning all the savings.
Getting rid of assets to avoid paying for care
Sometimes a person transfers investments or a property’s title deeds to someone else, such as a family member, so they can fall below the threshold and avoid paying the full cost of their care. This is also an example of deprivation of assets.
Doing this doesn’t necessarily mean those assets won’t be taken into account in a means test. The local authority is likely to treat you as if you still have the assets. This is called ‘notional capital’ and you wouldn’t be entitled to support until you have paid enough care costs to have depleted your capital, including this notional capital, to the means test threshold.
If you have savings and capital, and you want to work out the best way of paying for care, it’s a good idea to get advice from a financial adviser.
See our guidance on finding the right adviser for you.
Also, see our useful Get financial advice on how to fund your long-term care guide.
Age UK have some useful information about the deprivation of assets and the means test, depending on where you live in the UK:
Other factors that affect how much you pay for care
The cost of care varies a lot around the UK. The cost is usually higher where employment costs and properties are more expensive.
The cost of living in residential care can be split into:
- your care costs; and
- the hotel costs (including the cost of accommodation and food).
Find out how your local authority charges for care services on the GOV.UK website.
If you live in Northern Ireland, find your local Health and Social Care Trust on the nidirect website.
Which care home you choose can also affect how much you pay.
You can choose a more expensive one than the local authority is prepared to pay for. But usually your family (or sometimes you) will have to pay the difference.
This article is provided by the Money Advice Service.
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