According to a news article Covid savings: Britain built up second highest level on record in early 2021 household savings rose sharply in England during the first few months of 2021; with the national savings ratio rising to 19.9 per cent. The previous record was 25.9 per cent during mid-2020 as a result of nationwide lockdowns due to the ongoing pandemic when the British economy went into recession. 

How Much Savings Can You Have Before You Have To Pay For Care?

If you are a UK resident, the amount of savings you can have before having to contribute towards care home fee depends on whether you live in England, Wales, Northern Ireland or Scotland. Below is the threshold for each country:

  • England: £23,250
  • Wales: £50,000
  • Northern Ireland: £23,250
  • Scotland: £28,750

Anyone who holds savings above this amount will have to contribute towards their care home fees until their savings fall below this threshold. When that homes, claimants will be able to receive financial aid from the state through their local councils. 

The following criteria will be applicable in this case:

  • If someone has savings over £ 23,250, the claimant will have to bear the entire cost of the care home fees
  • If someone has savings of £14,250–£23,250, the claimant will have to contribute most of their weekly income towards care home fees. They will also pay an assumed extra amount of £1 per £250 of capital that they have
  • If someone has savings below £14, 250, the claimant will not be required to pay for their care home fees from this amount and will have to pay from their weekly income. 

Once an individual qualifies for funding from local authorities, they design a personal budget for them according to which the following criteria is decided:

  • the total cost of claimants’ needs
  • the amount of contribution to be made by the claimant
  • the amount of contribution to be made by the local council

To learn more about care home fees, we will discuss the following topics in this article:

  • How Much Can You Keep Before Paying For Care?
  • Who Pays Care Home Fees?
  • What Is A Deferred Payment Agreement?
  • How Are Care Home Fees Paid For?
  • Are There Any Other Care Options Instead Of Moving Into A Care Home?

How Much Can You Keep Before Paying For Care?

Claimants are permitted to keep a weekly allowance of £24.90 per week for themselves before paying for the care home fee. People who are on pension credit will be allowed an additional weekly amount of £5.75.

The good news for claimants is that according to a recent announcement by the UK Government, with effect October 2023 nobody will have to pay more than £ 86,000 as a care home fee. Once they have paid the amount, the remaining expense will be borne by the state and funded through their local council authorities.

Who Pays Care Home Fees?

Care home fees can be borne by the state, partially or wholly, depending upon the circumstances of the claimant or they may be self-funded, partially or wholly by those in care. According to estimates, nearly half a million people in the UK need a care home facility, Out of these 50 per cent of care home residents are self-funded while the rest of them are state-funded.

The amount that one pays towards their care costs depends on  whether they live in England, Scotland, Northern Ireland or Wales (each country has their capital thresholds that determine the claimant’s contribution as compared to that of the state) as well as the following financial aspects of the claimant:

  • income 
  • savings 
  • investments
  • property 

Care costs are means-tested. This means that this is a decision taken after a detailed financial assessment of the eligible individual. If someone needs care but is unable to bear the expenses the council takes care of them. 

Individuals living in care homes have the option of selling or renting out their unoccupied house to pay for their care home costs. However, if they have a partner or legal dependents living on the premises, the house will not be considered for care home costs.

What Is A Deferred Payment Agreement?

If someone is not willing to sell their house, there is an option of Deferred Payment Agreement according to which the homeowner signs a formal agreement with their local council. The local council agrees to bear the entire care home expense of the claimant until they are ready to sell their house or the property is sold after the death of the claimant. 

If you check your eligibility for the DPA scheme, below is a list of key criteria to be met:

  • your savings and capital are less than £23,250 
  • you have no other funds to pay for care home expense
  • you are a homeowner or are able to offer any other asset as security
  • in case of your home serving as security, it must be unoccupied

In addition to the care home facility, if the claimant needs medicines or general health care, the NHS will be willing to fund both for them under the NHS Continuing Healthcare. To qualify for this scheme, the claimant should have ongoing physical or mental health needs. In certain cases, the NHS may also pay a flat amount for the nursing care of the claimant.

How Are Care Home Fees Paid For?

Care home fees may be funded by either of the following means:

  • Self-funded
  • State-funded

In case of self-funded care home costs, the claimant either has income, savings or capital that contribute towards the expense or they may sell or rent out their house to pay for care home bills. Individuals on a low income, low savings or those claimants who do not own a property or those who may not be able to generate sufficient funds from the sale of their house may consider staying in their house and claim Attendance Allowance.

If the state is funding your care home fees, it will be routed through your local council and your benefits such as state pension and pension credit will be used to cover the costs. If you have capital below £23, 850, the state will bear most or in some cases all of your care home expenses.  

For more funding options click here how to avoid selling your house for care home fees

Are There Any Other Care Options Instead Of Moving Into A Care Home?

Sometimes it is advisable for individuals on low income to consider their situation and make a decision whether they will be better off staying home and receiving care (as well as state benefits) or will they be taken care of better in a care home facility. In such cases, they may consider applying for any of the following options:

  • Attendance Allowance 
  • Personal Independence Payments

Attendance Allowance is a tax-free state benefit applicable to those individuals who have surpassed the state pension age and require supervision due to their health condition. 

It is aimed towards providing a monthly allowance to those individuals who need assistance with meeting the extra costs of a disability or the support of a carer due to old age.

There is a general myth about Attendance Allowance that it may not be applicable for individuals who have means of earnings and may either be receiving wages or pension. However, it must be noted that this is not a means-tested benefit; which makes it unrelated to any source of income or savings that the recipient may have. 

If the recipient of the Attendance Allowance has a carer looking after them, their carer becomes eligible for Carer’s Allowance. However, the following additional conditions must be met as well: 

  • the person under care is a recipient of Attendance Allowance
  • the carer spends at least 35 hours per week taking care of the recipient
  • the carer’s income after tax is less than £128

PIP (Personal Independence Payment) is a benefit intended for people aged 16 years and above; aimed to cover the additional daily costs of living with a long-term disability or illness; be it a physical or mental health condition. It is gradually replacing DLA (Disability Living Allowance) by providing recipients with: 

  • extra money in addition to their prevailing benefits 
  • a reduction in their Council Tax or Road Tax bills 
  • discounts on travel

Claimants may be able to receive a premium on the following benefits as well if they are eligible for PIP:

  • income support
  • jobseeker’s allowance
  • working tax credit
  • employment and support allowance 
  • pension credit 
  • housing benefit

If the recipient of the Attendance Allowance has a carer looking after them, their carer becomes eligible for Carer’s Allowance. However, the following additional conditions must be met as well: 

  • the person under care is a recipient of Attendance Allowance
  • the carer spends at least 35 hours per week taking care of the recipient
  • the carer’s income after tax is less than £128

Conclusion:

With a rising savings ratio for the past few years, ageing residents will now be in a better financial position to be able to afford care home fees for themselves; without having to worry about forgoing their property to pay for one of the highest expenses that retired individuals are faced with.

However, there are certain thresholds as well as a financial assessment of individuals based on which councils decide how much to contribute towards the care home fees of claimants as well as the amount due upon individuals.

Should the care home fees be unaffordable for someone and their needs are not extensive enough for care home residency, claimants have the option of having an attendant or carer live with them in their house. In this case, the dependant individual becomes eligible for Attendance Allowance while the carer may qualify for Carer’s Allowance. Such options may help to reduce the financial burden on those who are living on limited means. 

FAQs: How Much Savings Can You Have Before You Have To Pay For Care?

How much money are you allowed to keep if you go into care?

Care residents are allowed to keep £24.90 as a weekly allowance for their personal use if they go into a care facility. Those individuals who are on Pension Credit are entitled to another further £5.75 per week.

Do dementia sufferers have to pay care home fees?

Yes, dementia sufferers have to pay care home fees as well. The amount of their contribution towards care home fees depends upon the results of the financial assessment of their income, savings and capital carried out by local authorities.

How do I protect my savings from a nursing home in the UK?

If someone does not want to use their savings from being used for nursing home fees they can either explore other modes of payment to cover their care costs or maintain savings under the indicated threshold of £ 14, 250.

What happens to your savings when you go into a nursing home?

Your savings and monthly income are directed towards the payment of your nursing home fee. However, these savings need to be more than £ 14, 250 for a care home resident to be able to contribute towards their care home expenses.

What is the 5-year lookback rule?

According to this rule, a senior who has applied for Medicaid and is found to be eligible is found to be in possession of gifted assets within a five-year look back term, they may lose their eligibility status for a few months.

References:

Who Pays for What in 2021/22? – carehome.co.uk advice

Paying care home fees | Social care means tests

Paying for your own social care (self-funding)

Paying your own care costs if you’ve used all your savings

How To Avoid Selling Your Home To Pay For Care…

Paying for permanent residential care | Paying for a care home

When the council might pay for your social care

Attendance Allowance

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.

John has 22 years of experience in financial services. This spans across financial research, financial services (As a qualified mortgage broker and underwriter), financial trading and sales at global investment banks. While working as a publishing research analyst, he covered European bank credit and advised institutional clients on investment strategies at both JP Morgan and Societe Generale. John has passed all three levels of the CFA (Chartered Financial Analyst) programme.