Act now to avoid the care home lottery

If you're planning for your old age, you'll have to fight for your rights

Although one in four British people will be living in a care home during the final years of their life, very few families consider the financial implications until the last moment.

Once they do, they soon realise that both residential and nursing homes are very expensive, and that getting any help from the state is extremely complicated – even for those with few or no assets.

This week, however, the Government gave the first hint that it may address the complexity of long-term care funding, possibly removing the means tests that residents in England and Wales are currently subjected to and designing a fairer system, which is more affordable both for the families involved and for the state.

But alas, any changes are unlikely to come into effect for many years. For those negotiating the minefield of care funding today, it is crucial to do your research to ensure that you get the state aid you are entitled to, and to prevent the all-too-common scenario of you or a relative being forced to move care homes because the money has run out.

WHAT STATE HELP AM I ENTITLED TO?

Although a wide range of financial help and benefits is available from the state, the budgets of local authorities and strategic health authorities are so stretched that they will often do everything they can to make sure that you do not receive your full entitlement.

There are two main types of care. Personal care covers your day-to-day needs, such as washing, cooking and cleaning – anything that can be carried out by a regular care-worker. Nursing care, however, relates only to help that must be provided by a medical professional.

In England, the local authority will pay for all your personal care costs, above and beyond what your pension covers, if you have assets of less than £13,000 (£17,250 in Wales, £12,500 in Scotland), and will pay part of your care bill if you have assets of between £13,000 and £21,500 (£22,000 in Wales and £21,750 in Scotland).

Although any property you own will be included in your total assets, it is worth knowing that the authorities cannot take this into account if your partner or another elderly relative is to continue to live in the property. Furthermore, if your property is co-owned with a relative, it should not be counted.

Local authorities are also not allowed to take your property into account during the first 12 weeks after you move into a care home. Many people miss out on receiving the state aid they are entitled to at this time.

As well as local authority aid, all those in care are also entitled to attendance allowance – £43.15 a week for those who only need care in the daytime, and £64.50 a week for those who are in need of round-the-clock assistance.

Anyone in need of nursing care is entitled to an additional NHS allowance of £101 a week. However, if your relative's nursing care needs are very complex, they may be entitled to "NHS Continuing Care" – which means that your local strategic health authority must pay for all their nursing care costs.

"It's worth remembering that although a relative may not qualify for continuing care when they first move into a nursing home, they may qualify later on if their condition deteriorates, so it is worth requesting a review at this stage," says Phil Spiers of the Nursing Home Fees Agency (NHFA), the specialist long-term care adviser.

If you are entitled to state help, you will unfortunately often be restricted in your choice of care home. Spiers says local authorities tend to buy blocks of beds at a small number of care homes – which could be on the other side of the county from their family and other support networks. If a family want their relative to go to a home of their choosing, they may well have to agree to top up their care fees.

"What's getting worse is trying to find accommodation for the price that local authorities are prepared to pay," Spiers says. "In many cases, self-funding patients are being forced to pay higher fees to subsidise those who are state-funded, or families are being forced to contribute more."

Owain Wright of Saga's care-funding arm says that the amount you receive also depends on where you live. "It has become a real postcode lottery," he says. "If you're receiving your care in West Sussex, for example, you might end up receiving less than someone who lives in East Sussex, even though the costs of care are relatively similar."

PAYING FOR YOUR OWN CARE

If you have to pay for some or all of your own long-term care, it's important to seek out financial advice from a specialist long-term care adviser, such as the NHFA or Saga, when working out a financial strategy. Many people end up unnecessarily selling their homes, or running down their capital – wasting money because they have not explored all the options. One of the most efficient ways to pay for care-home fees is to take out an immediate needs annuity, which will guarantee to pay your care fees – rising along with inflation if you wish – for the rest of your life. These often represent very good value. For example, a £200,000 annuity for someone with dementia could pay out in the region of £60,000 a year.

Spiers says that for those who look as though they may run out of money while they are still in care, it is important to make plans as soon as they move into a home. In recent years, there have been dozens of shocking stories of elderly people being evicted from care homes after their money ran out and the local authority refused to pay to keep them at the home of their choice. In some cases, a move of home can be so traumatic it proves fatal.

Both the NHFA and Saga provide free and impartial telephone advice services, as well as a wealth of literature and information on their websites. NHFA: 0800 998 833; www.nhfa.co.uk Saga: 0800 056 6101; www.saga.co.uk/finance/spf/ltc

'There's a conspiracy of silence when it comes to long-term care'

Peter Kalinowski, a management consultant from Surrey, first began to learn about the nightmares of long-term care funding last year, when his mother-in-law was diagnosed with dementia, and he and his wife decided to move her to a care home.

In spite of working as a consultant within the NHS at the time, he was amazed at how difficult it was to get any advice, either about his mother-in-law's medical condition or her financial situation.

"There's a conspiracy of silence," he says. "It took us three years to even get her formally diagnosed with dementia.

"We've met many people who have put their elderly relatives into nursing care, but they've all said they haven't been given the correct advice."

After doing some research, Peter eventually came across Saga's care funding advice service, and says he was relieved to find he was finally dealing with a team of advisers who understood this complex area.

Peter's mother-in-law was facing intimidating bills of £60,000 a year at her new care home.

However, Saga pointed Peter towards an immediate needs annuity, which guaranteed the necessary £60,000 a year, plus inflation, for the rest of his mother-in-law's life – and cost just £200,000.

"It actually didn't cost that much, and it's given us peace of mind," he says. "Now we know that whether she lives one more year or 10 more, we haven't got anything to worry about."

Peter says he only wishes he had discovered the Saga advice service sooner than he did.

"There are a lot of sharks out there. We saw one firm of advisers who wanted £15,000 up front before they would do anything," he says.

"But the service that Saga's advisers provided us with has been absolutely excellent."