Planning for Care Costs in Later Life

The cost of care in later life is one of the biggest financial uncertainties people face. Understanding how the system works, what the government will pay, and what you might need to fund yourself is an important part of long-term financial planning.

Types of Care

Social care broadly falls into three categories:

• Domiciliary (home) care — a carer visits your home to help with daily tasks. Costs vary widely by region but typically range from £15 to £30 per hour.
• Residential care — living in a care home that provides help with personal care, meals, and activities. Average costs are approximately £800 to £1,200 per week (£42,000 to £62,000 per year) depending on location.
• Nursing care — a care home with registered nurses for people who need medical care. Average costs are approximately £1,000 to £1,500 per week (£52,000 to £78,000 per year).

The NHS pays a Funded Nursing Care contribution (approximately £220 per week — check NHS England for the current rate) towards the nursing element if you are in a nursing home but do not qualify for full NHS Continuing Healthcare.

Means Testing: What Will You Pay?

In England, your local authority assesses your finances to determine how much you pay towards care:

• Capital above £23,250 — you pay the full cost of your care (self-funder)
• Capital between £14,250 and £23,250 — you pay a contribution based on your capital and income (a “tariff income” of £1 per week for every £250 of capital above £14,250)
• Capital below £14,250 — your capital is disregarded, but you still contribute from your income (minus a Personal Expenses Allowance of £28.25 per week)

Your home is usually included in the means test if you move into residential care, unless a spouse, partner, dependent relative, or someone aged 60+ still lives there.

The Care Cap

The government has announced a £86,000 cap on the amount anyone will need to spend on their personal care costs over their lifetime. Important details:

• The cap only covers personal care costs — not accommodation, food, or daily living costs in a care home (“hotel costs”)
• Only care costs paid at your local authority’s rate count towards the cap — if you self-fund at a higher rate, the excess does not count
• Once you reach the cap, the local authority pays your ongoing personal care costs

The implementation timeline has been subject to delays, so check current government guidance for the latest position.

NHS Continuing Healthcare

If you have a primary health need (a severe, complex, or unpredictable health condition), you may qualify for NHS Continuing Healthcare (CHC). This is fully funded by the NHS and covers all care costs, including residential care.

CHC is needs-based, not means-tested — your finances are irrelevant. However, the assessment process is rigorous and not everyone who applies qualifies. It is worth understanding the criteria and requesting an assessment if you believe it applies.

Planning Ahead

Steps you can take now to prepare for potential care costs:

• Build it into your financial plan — Wealth365 lets you model care costs as a future expense in your projections
• Consider a care costs insurance product — immediate needs annuities convert a lump sum into a guaranteed income to pay care home fees
• Lasting Power of Attorney — put these in place while you are healthy. A financial LPA allows someone you trust to manage your money if you cannot. A health and welfare LPA covers care decisions.
• Keep savings accessible — do not lock all your savings into pensions or long-term investments. Some accessible savings can bridge the gap if care is needed before pension age.
• Talk to family — discussing care preferences and finances with family members helps avoid rushed decisions during a crisis