Now you're 64 and need a hand

A good standard of care in old age comes at a price. Tony Lyons looks at what it takes to provide it

People are living longer. In the past this hardly mattered as family and friends provided a network of care. But with the break up of the extended family, children moving further away for work, divorce, more of the elderly living alone, it's more important than ever to think ahead, to plan for possible long-term care in the future.

Caring for the elderly and infirm is estimated to cost nearly pounds 50bn a year - and the bill is rising. Meanwhile the standard of care and attention we have come to expect is beyond the financial capabilities of most families. This means that as the state becomes less and less able to adequately look after its citizens in their old age more elderly people could be forced to sell their homes to pay for some sort of long-term care.

This has presented a myriad of problems, few of which can readily be solved. Hospitalisation is not the answer for the elderly or the infirm.

Nursing, whether at home or in an institution, is an expensive affair - care fees average pounds 335 a week or pounds 17,500 a year. Each year more than 40,000 homes are being sold to pay for the rising costs of caring for the elderly.

The Government has a Royal Commission looking at better ways of providing long-term care. But in the meantime a long-term care policy, providing cover for cases of serious ill health and infirmity, is one of the few defences available against the ravages of age. But of the 180,000 that go into care each year, less than a quarter will have made their own provision.

Paul Harvey, of long-term care experts Caswell and Company, independent financial advisers in Oxted, Surrey, says: "`Long-term care' is an all- embracing phrase that the life insurance industry has adopted for its protection policies." This generalisation causes confusion in an already complicated sphere. There are no fewer than 10 companies offering a variety of ways to fund for this provision.

The prime factor to be considered when taking out a long-term care policy should always be the level of care rather than the cost, drawing upon past experiences of the events surrounding one's own relatives and friends.

"Basically there are two mistakes you can make," says Mr Harvey. "The first is to proceed to take out the cover, pay the premiums and die peacefully in your bed aged 85 without ever having made a claim. This route may incur the wrath of your children who would consider the insurance a waste of money.

"The second mistake is to do without long-term care, instead saving the money you would have paid in premiums. In 10 or 12 years' time you may have amassed pounds 20,000. But what if you then have, say, a stroke? Your ill-equipped spouse may then have no option but to put you in a nursing home where the fees could cost up to pounds 30,000 a year, draining your capital reserves and children's inheritance."

Don't be certain that you won't need long-term care. Every year some 100,000 suffer a stroke, and at any time there are 350,000 who have suffered from one that has left them with a severe disability; some 680,000 over 65 suffer from some form of dementia; and more than 40 per cent of the over-65s have a long-term illness that limits their ability to perform everyday activities.

It is vital to remember that, as things stand, there is no assistance from the Social Services until your total assets are below pounds 16,000. To help you to make the right choice you need to talk to an adviser about the type of care you might need, what would be a reasonable cost, how much savings and income you have, and how much you would be entitled to receive.

DO'S AND DONT'S OF LONG TERM CARE

Do involve your family in any decisions you make.

Don't proceed with an investment contract unless you fully understand the risks involved.

Do make sure you have a thorough understanding of all the products available, not just one.

Don't wait until the Royal Commission deliberates on legislation for long term care.

Do proceed to make provision with a company that will alter its policy in line with future legislation, at no extra cost to you.

Do check whether your premiums are going to increase and if so, by how much.

Don't forget that the lawn will still need mowing and household chores are still going to have to be done. Find out who will offer you a tailor- made plan.

Do consult an experienced independent financial adviser who is a long term care expert.

Do go to another company if your premium is loaded because of existing health problems.

Do calculate what your lifetime income will be for you and your spouse.