6 useful tips to help finance long term healthcare

In the UK, the National Health Service (NHS) provides a variety of long-term healthcare options, fully or partially funded by the state. There are two primary options for NHS healthcare, based on your eligibility for the contributions:

NHS continuing healthcare

A comprehensive package that is fully funded, meaning no direct cost to the individual receiving the care. This care is available in one’s own home or a care home, ensuring individuals receive the necessary support regardless of location.

NHS funded nursing care

This serves as a provision for those in need of help but a less comprehensive level of support. In this instance, the NHS covers the nursing care part of the fees for those residing in nursing homes.

How do I obtain NHS contributions?

1. Complete an initial assessment conducted by healthcare professionals who will evaluate the nature, complexity, intensity, and unpredictability of your health needs.
2. Within 28 days, a decision should be reached regarding your eligibility for a full assessment of your healthcare needs.

Those who show eligibility for long-term complex health needs qualify for free social care arranged and funded solely by the NHS. Those who are not eligible for NHS continuing healthcare may be eligible for NHS Funded Nursing care, a fixed subsidy paid directly to the care home.

A lasting power of attorney (LPA) allows you to designate one or more individual(s) to assist you in decision-making or to make decisions on your behalf. This ensures some control over your affairs is retained if you’re no longer able to make decisions.

LPAs come in two varieties: one for health & welfare and another for property & financial affairs. The health & welfare LPA becomes effective when you can no longer make decisions for yourself, while the property & financial LPA is operational once registered, regardless of your capacity.

Often, the financial burden of long-term healthcare comes from the need of help in everyday life. In this instance, the state can provide benefit allowances to help relieve such a burden.

Attendance allowance

Attendance allowance assists with additional costs associated with having a disability requiring another person’s help for care. Eligibility for attendance allowance begins upon reaching the state pension age for those meeting specific criteria related to health, care needs, and residency status. The benefit offers two different rates, which are determined by the level of care required.

Did you know?

The current state pension age in the UK is 66 years old for both men and women. However, it’s scheduled to start increasing gradually from 6 May 2026, reaching 67 years old between 2026 and 2028.

Carer’s allowance

Often, the financial implications extend beyond those requiring long-term care. Family and friends frequently assume the role of carers, which can significantly reduce their ability to work and lead to financial strain.

The carer’s allowance is designed to alleviate such burdens. A carer is entitled to £76.75 per week if they provide at least 35 hours of weekly care to someone who receives certain benefits.

An annuity is an agreement between you and typically a life insurance company, in which the insurance company makes a series of payments to you in return for a premium or premiums paid. In other words, an annuity converts your savings – which stands as a lump sum – into a sort of pension scheme, by which you get given a certain amount of money each year. These come in two forms:

Immediate needs annuity

An immediate needs annuity provides financial support for your care costs, filling the gap between regular income and the expenses of your care.

The cost of this plan is determined by the amount of income you require and the estimated duration you will need it. It is structured to commence payouts promptly to address the individual’s urgent financial needs. Additionally, the income from this annuity is exempt from taxes when paid directly to a certified care provider.

Deferred needs annuity

Deferred needs annuity functions similarly to an immediate needs annuity. However, in this version the income is not disbursed immediately. Instead, you can choose to have the income start at a later date. During the interim ‘deferred’ period, you’ll need to cover care fees using alternative funds.

Opting for a deferred needs annuity can be more cost-effective than its immediate counterpart, as payouts commence when you’re older, reducing the expected payment duration for the insurance company and potentially lowering the overall cost.

By choosing a deferred needs care annuity, you lock in your annuity rate in advance, safeguarding against potential declines in annuity rates. This ensures you’ll receive payouts based on the pre-set rate, regardless of future rate fluctuations. However, should annuity rates rise, you would still be bound to the initially agreed-upon lower rate.

Investment bonds offer a strategic approach to managing long-term healthcare finances. When a local authority evaluates your financial capacity to contribute towards care costs through a means test, the capital value of investment bonds is generally not included. This exclusion is due to the classification of investment bonds as life insurance policies.

Should you derive a regular income from an investment bond, this income will be factored into your income assessment.

{NOTE: If you are already in need of care, transferring your assets into bonds to circumvent care costs would be deemed as deliberate deprivation.}

Understanding capital thresholds for long-term healthcare is crucial when planning costs. In England, if your savings exceed £23,250 you are ineligible for care cost assistance from your local council. Additionally, owning a property disqualifies you from receiving help if you are considering moving into a care home.

However, you have the right to request a financial assessment, or means test, from your council to determine if you qualify for any cost support. If you are moving into a care home permanently and need to utilise your property’s value to pay for care home fees, you may be entitled to a 12-week financial reprieve. During this period, the council will not include your property’s value in the financial assessment. Depending on your income and other savings, the council may contribute to your care home fees during these 12 weeks or until your property is sold, whichever occurs first.

Steer clear of deliberate deprivation

Deliberate deprivation is intentionally reducing one’s assets to minimise the personal financial contribution towards care services.

For the local authority to consider an act as deliberate deprivation, they must demonstrate that the individual was aware of the potential need for care and support in the future at the time of asset reduction. This assessment is based on evidence of both the foreseeability of needing care and the intention behind the asset reduction. Contrary to common beliefs, there is no time limit for assessing deliberate deprivation.