Take care of No1

It is worth starting to plan for long-term care early

Killjoy. That is the name used to describe someone who repeatedly spoils everyone's fun - such as referring to the possibility that at a late stage in many people's lives they may need help in looking after themselves. And pointing out that this care may prove highly expensive.

Even so, it is better to be a killjoy at times than to pretend that there is nothing to worry about when it comes to looking after oneself in old age.

The evidence points to the fact that we all live longer today than even a decade ago - up to the age of 80 and beyond, on average. Most of us will still be fit at that age. But some will require help with their daily living needs.

At present, the average costs of full-time care are about pounds 17,000 a year, while the cost of care in one's own home can rise to pounds 30,000 if two carers are needed.

Despite changes announced by the Chancellor in the November 1995 Budget, a local authority will only contribute totally to these costs if an individual's total assets are pounds 10,000 or less. Anyone with assets of up to pounds 16,000 is means-tested, while the entire cost of care is recouped by the local authority if assets are over that amount.

The cries of anger from many who discovered that their homes were calculated as assets led the Government not only to increase the lower limits before income was assessed from pounds 6,000 to pounds 10,000, as stated. It also provoked a promise to review the provision of long-term care funding, to see whether incentives could be given to people who are prepared to provide some form of private cover for themselves.

Last year, Stephen Dorrell, the Health Minister, proposed tax incentives to help out. For every pounds 1 of insurance cover, an extra amount of assets can be kept on top of those already allowed.

If the "disregard" is pounds 1.50 for every pounds 1 of cover bought, a person would be able to protect pounds 70,000 of assets before being means-tested.

Another variation floatedlast year would involve a policy being taken out for a limited period, say four years. In return, a higher amount of assets would be disregarded, say pounds 25,000, plus an additional pounds 1 for every pounds 1 of cover taken.

David Aaron, an independent financial adviser at The Aaron Partnership in Milton Keynes, points out: "[These schemes] are aimed at people who are moderately wealthy, say owning a property worth pounds 100,000, but not for those with more substantial wealth."

Nor are they much use to low-asset families, who will presumably continue to be means-tested and get relatively inferior nursing care because they cannot afford better.

In any event, a draft Bill on long-term care is due next week. However, given the proximity of a general election, there are doubts as to whether it will ever make it on to the Parliamentary slipway.

If reliance on the state to fund the cost of long-term care is increasingly less of an option, what are the alternatives? Mr AAron suggests there are several.

The first is to maximise savings, possibly by adding to one's portfolio so that the funds can be used to pay for care when it is needed. Although this is a helpful start, the cost of care can rapidly dissipate even large amounts of money.

Pensions also offer benefits, in that contributions to them are tax-deductible and the investments grow in a tax free environment. The problem is that most people do not fund enough to provide themselves with a decent income, let alone the extra needed to pay for care. Nevertheless, an increase in pension contributions is useful too.

At retirement, a lump sum is often paid as part of a pension. This can be used to pay for an annuity, a further annual income, or invested until a person needs that money to pay for long-term care, when an "impaired life" annuity can be bought.

A man in good health aged 80 with a pounds 100,000 lump sum can secure an income of pounds 13,000 net of basic tax. An impaired life annuity, perhaps because he has suffered a stroke, will pay pounds 21,000 a year, Mr Aaron points out.

The final option is insurance, protecting oneself against the possibility of needing care. The odds here are at present five to one against needing care.

There are several companies offering this type of cover, including Commercial Union, PPP Lifetime, Hambro Assured, Prime Health, Scottish Amicable and Bupa. Choosing between them is a job for an independent adviser.

The most important thing, as our table shows, is to begin to plan early. The younger you are the less it costs - even if you are accused of being a killjoy for pointing it out.

For a free 'Guide to Long-term Care', call the Aaron Partnership, 01908 281544.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search

Money Insider: How to make credit cards pay

Andrew Hagger reveals how to get the most from your plastic

Questions of Cash: My 'perfect travel companion' from the Post Office was a waste of money

One reader purchased the Post Office Travel Money Plus Card for a motoring holiday but discovered it can't be used at self-service petrol stations or autoroute toll booths

Continuing low interest rates are encouraging more people to switch to interest-only mortgages

Interest-only mortgages return to give more flexibility to borrowers

The credit crunch put a temporary end to these once-popular mortgages. But lenders are waking up to rising demand and relaxing their rules

EU to scrap roaming charges in 2017: European Commission under fire for taking so long to act

UK consumer groups complained that British holidaymakers face another two years of mobile phone misery before the law comes into effect

On the money: Yorkshire building society has demonstrated that it is taking the P2P industry seriously

Is peer-to-peer lending a risk worth taking?

The P2P industry must do more to shake off an unjustified image of being too complex and risky for the everyday saver, says Andrew Hagger

Generating grievances: Scottish Power's Longannet station in Fife

Questions of Cash: Scottish Power says it's sorry - again and again

Six of the energy company's customer have cause to blow a fuse this week

Will Patisserie Valerie be the portfolio's sweet spot?

Derek Pain: 'Patience is a virtue but maybe I should cut and run'

Derek's portfolio is currently suffering because of his failure to be more ruthless

There are now more than three million people in “severe problem debt”

Debt managers are misleading vulnerable people, warns watchdog

One debtor was given a repayment plan that would have taken 125 years to repay

Challengers are smashing the traditional high street banks when it comes to offering decent savings rates

Ignore the new breed of savings institutions and you'll lose interest

NatWest has ripped up its pledge to never be the last bank in town

NatWest pledged five years ago it wouldn't close the last bank in town. Now villagers have been told the branch shuts in September

When the last bank closes, local shops quickly go out of business

Under new state pension rules we will all be much worse off

Why did no one notice? The Government hides behind complexity, says Neasa MacErlean

Bogus Islington landlord scams public for £20,000 in fake deposits

It’s not just Islington... Simon Read warns renters and landlords about a nationwide fraud operation

Questions of Cash: The paperwork wasn't right so I was left high and dry with a broken washing machine

A reader encountered a problem with a Currys washer/dryer care plan

Borrowers should steer clear of established providers to get the best rates

Interest rates have never been cheaper if you want a five-figure personal loan but for lower-value loans it's a very different picture

Personal banking: Banking chiefs at NatWest and RBS insist that they are over the worst of the technical issues but customers are still complaining of payment issues. NatWest has waived overdraft fees and told customers they can withdraw £100 more than their limit over the next few days

People’s bank in crisis again: What should you do about the NatWest/RBS meltdown?

Thousands still waiting for payments to go through

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Assistant / Buyer

    £15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

    Recruitment Genius: Compliance Manager

    £40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

    Day In a Page

    The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

    Gaping hole at the heart of the European Union

    Treatment of Greece has shown up a lack of genuine legitimacy
    Number of young homeless in Britain 'more than three times the official figures'

    'Everything changed when I went to the hostel'

    Number of young homeless people in Britain is 'more than three times the official figures'
    Compton Cricket Club

    Compton Cricket Club

    Portraits of LA cricketers from notorious suburb to be displayed in London
    London now the global money-laundering centre for the drug trade, says crime expert

    Wlecome to London, drug money-laundering centre for the world

    'Mexico is its heart and London is its head'
    The Buddhist temple minutes from Centre Court that helps a winner keep on winning

    The Buddhist temple minutes from Centre Court

    It helps a winner keep on winning
    Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

    Is this the future of flying?

    Battery-powered planes made of plastic, and without flight decks
    Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

    Isis are barbarians

    but the Caliphate is an ancient Muslim ideal
    The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

    Curse of Brink's Mat strikes again

    Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
    Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

    'The ministers talk to us about miracles'

    Why Greeks are cynical ahead of the bailout referendum
    Call of the wild: How science is learning to decode the way animals communicate

    Call of the wild

    How science is learning to decode the way animals communicate
    Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

    'The economic collapse has happened. What is at risk now is democracy...'

    If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
    The science of swearing: What lies behind the use of four-letter words?

    The science of swearing

    What lies behind the use of four-letter words?
    The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

    The Real Stories of Migrant Britain

    Clive fled from Zimbabwe - now it won’t have him back
    Africa on the menu: Three foodie friends want to popularise dishes from the continent

    Africa on the menu

    Three foodie friends want to popularise dishes from the hot new continent
    Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

    Who will fill Donna Karan's boots?

    The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'