Every year the number of people who require care in the UK rises due to increased life expectancy and an ageing demographic. According to the Office for National Statistics there are approximately 2 million people in the UK aged 85 or over and this is expected to increase to 3 million by 2041.
There is a huge misunderstanding among the UK public that social care is free and is paid for by the government and our taxes. However, social care has never been free and can be very expensive. Most people tend not to plan for the possibility of needing social care in later life and some are unexpectedly faced with the challenge of figuring out how they’ll pay for it.
On average it costs a woman £132,000 and a man £82,000 to live out their lives in a care home in the UK*.
How to pay for care in later life
The care system can be complex and confusing. There are so many factors to consider including what support you’re entitled to, which local authority you fall under, and what support they can offer – if any.
Around a third of people in the UK self-fund their care needs. There are several ways to pay for care including:
• Insurance policy
• Savings and investments
• A deferred payment scheme
• Rental income from a residential property
• By selling or downsizing your home
• Using equity release
These options are not all available to, or suitable for, everyone. Specialist firms like My Care Consultant can provide guidance on what options are available to you and put together a bespoke plan to fund your care needs.
At Personal Retirement Planning we specialise in equity release and lifetime mortgages, which is just one of the ways to pay for care.
Using Equity Release to Pay for Care
Equity release allows homeowners to access some of the equity tied up in the value of their home. The value of your home, minus any outstanding mortgage and any other loans secured against it, is the equity you have in your property.
Equity release is available to homeowners aged 55 and over with a property worth at least £70,000, although it is not suitable for everyone, which is why it is important to get independent advice before you make a decision.
People release equity from their homes for several reasons. Some of the most popular reasons for equity release include:
• Repay existing mortgage
• Pay off an interest-only mortgage
• Purchase a second home or a holiday home
• Clear credit cards and loans
• Make home improvements
• Help family get onto the property ladder
• Supplement retirement income
• Split wealth and assets during a divorce
• Give a living inheritance and reduce inheritance tax
• Pay for care costs
For many people, equity release is the most viable solution to funding care costs in later life. Residential property is often the largest financial asset that people have and it is playing an increasingly important role in later life financial planning.
Some of the benefits of using equity release to fund care needs include:
• Stay in your home until you move into a permanent care home or die
• Continue to own your home
• Benefit from any future increases in the value of the property
• Never owe more than your home is worth
• Flexible products, lower interest rates
3 Factors to Consider When Using Equity Release to Pay for Care
1. The extent to which your residential property can be used to pay for care and how.
2. Whether equity release will affect your entitlement to state benefits.
3. The role of property as a constituent part of estate planning.
These are just 3 of many factors that you will need to explore when considering equity release to pay for care.
At Personal Retirement Planning we have specialist knowledge and experience to make suitable recommendations based on each client’s individual circumstances. To learn more about using equity release to pay for care cost please contact one of our Equity Release Specialists, Barry Leigh, on 07980 210953 or email firstname.lastname@example.org.
*Jane Portas and Insuring Women’s Futures, Chartered Insurance Institute, 2019