How Much Should You Expect To Pay For Later Life Care?

Paying for care can seem like a daunting task. The recent scrapping of a cap on how much you pay towards care could now be making it a whole lot harder. In 2021, the Government announced plans for a £86,000 cap on how much you would pay for care in your lifetime. The plan was to address the huge issue of cost of care and its potentially financially catastrophic consequences for families. There was a lot of pressure for something to be done – and this was the big plan!  

However, in July 2024, the incoming Labour Government scrapped the plan. A culmination of numerous ‘kicking the can down the road’ tactics from previous Governments before them. This Government has launched yet another consultation – this time with the long-term aspiration of creating a National Care Service. However we won’t hear any recommendations for this until 2028.

Along with the scrapping of the cap, there is also rising costs across the board, which have massively impacted on the care sector. The cost of care has outpaced inflation consistently for the last 2 decades. Rising energy prices have significantly impacted the care sector, with struggles to recruit and retain staff and building prices generally rising. All of this has meant increases in the cost of care.

When Is The Right Time To Start Planning For Care?

This is the million dollar question. Many would argue that younger people should be thinking about this. However the reality is many pre-retirees are finding it hard enough to plan for a standard retirement, let alone think about planning for long-term care - which might not even happen. The problem is if long-term care does happen, there is the potential for catastrophic costs – potentially wiping out a lifetime of hard-earned savings.

You would think the perfect solution would be a pre-funded insurance plan. Something you can pay into, and benefit from, in the event that catastrophic long-term care costs do arise. Unfortunately these kind of plans did not take off and faded away in the 1990’s. Younger pre-retirees were more interested in investing into their pension plans for their retirement. For older retirees, the premiums became too expensive with potential care costs on the horizon. That being said, if looking into care funding perhaps for elderly parents, it is worth checking to see whether they took one of these plans out in the 1990’s – they could be very valuable now!

There has been a general narrative in recent times that, should you need care, then eventually the Local Authority will come along and take away your home to pay for the care. So many people were led into putting their property into Asset Protection Trusts – to help protect their property from care costs. In our opinion this is almost always not a great solution. It means that you will have nothing to pay for care and will have to rely on the Local Authority, who will provide your care but only to their standard and budget, not necessarily your standard.

How do you pay? Do you pay?

The cost of care varies depending upon where you live. Costs do track quite similarly to house prices and therefore for BS9 and North West Bristol in general, expect it to be expensive.

The Local Authority will support financially you if you have less than £23,250 in assets (and you don’t have enough income to pay for your care). As above, this will be on a Local Authority budget and maybe not quite the kind of standard of care you envisaged for yourself.

Above £23,250 in assets? Congratulations, you’re a self-funder! There are lots of different care arrangements and situations, all with different price-tags. Margaret Thatcher lived her last years in the Ritz costing £1,000 a night - £365,000 a year plus the cost of carers. That is a lot of money.

However you don’t have to spend that kind of money. You can spend £100,000 a year on an absolutely fantastic care home. £70,000 or £80,000 a year and you still probably going to get a very good care home. It really is up to you how much you want to pay for your care, or whether you want to save money and perhaps leave assets to your children. It depends on what is important to you given your individual situation.

Your Home And Care Costs

How your property is treated for care purposes depends on different factors and it can get quite complicated. Certainly, for the first 12 weeks in a care home the property will be disregarded. It will also be if you go into temporary respite care (to give the carer a break for example), your spouse or partner still lives in the home , a relative 60 or over does or an incapacitated child (generally qualifies n benefits / incapacitated. In these situations then your home is disregarded.

Be really careful with Asset Protection Trusts – in other words putting your house into trust to protect it from being sold to pay for care fees. It is really important to take specialist legal advice from a solicitor or suitably qualified financial adviser before being led down this path. Sometimes they do work, but if they do, then you are reliant on the Local Authority in providing your care – which might not be your desired outcome when you move into a budget care home. If they don’t work then all you have done is handed over your hard-earned money in fees to a legal promotion.  

Many people in later life do not want to give up their house. Perhaps it has sentimental value or for practical reasons it is better to receive care at home. The Care Act 2014 introduced the well-being principle, which amongst other things, promoted the ability for people in later life to stay at home and for the Local Authority to support that where possible. Therefore, if things are getting difficult at home, it doesn’t mean you have to go to a care home.

The Local Authority will initially do a Care Assessment of eligible needs, and if your assets fall under the £23,250 threshold then the Local Authority will support you by topping up any other income you have to pay for care. You will always be left with a Minimum Income Guarantee – because you still have to pay your energy bills, council tax etc. Although there are lots of exemptions out there for people in later life – take financial advice.

If wanting to stay at home you could also take out Equity Release on the house. This means taking equity out of your home in order to help pay for care at home. Perhaps you would like to pay that bit extra to pay for the consistent carers you want and have become accustomed to. For many it’s preferable to stay at home where you have lived for 40 or 50 years with all of your familiar belongings and keepsakes around you. You have your garden roses that you have tended to for decades which are such a  big part of your life. Life at the family home can be very difficult to depart from, it can be part of your identity. Moving out of your home can lead to serious health and emotional issues for some.  

Another type of equity release, provided by the Local Authority when your assets are below £23,250 and you are moving into a care home is the Deferred Payment Agreements (DPAs). The Care Act 2014 compelled the Local Authority to offer DPAs for those eligible. So, if you go into a care home and your home is empty, you no longer have to sell your house to pay for care – in lifetime. Debt is applied to the home to pay for the care fees, which would eventually have to be repaid, typically upon death, unless there is someone in the family that wanted to pay off that debt. So you might not have to pay it off in lifetime, but probably after death you will have to sell it.

Under a DPA the Local Authority will only lend up to their cost of care rate – which is a considerably lower rate than what a self-funder would pay. Therefore if you want a really posh home with spas and treatments, restaurants and plenty of activities, the Local Authority are not going to be paying for this. So you need a third party top-up – a kind family member is needed! If there is no third party top-up then you are looking to sell the house to fund the care. Sell the home and you have a lump sum to use from the proceeds of selling your property. This is often the simplest and cheapest way to get the care you want and need.

Will I Run Out Of Money?

If you sell your property for £500k, your income is £20k per year and the care home is costing you £100,000 per year (so a shortfall of £80,000 per year). You don’t want to live longer than 6 years – your money could run out.

In order to contain the costs of care, we strongly recommend exploring an Immediate Care Plan. You invest a lump sum with an insurer in exchange for a guaranteed income for the rest of your life. Therefore in this example , it would guarantee that £80k / year for the rest of your life is paid towards your care, giving you the peace of mind that your care is paid for.

Gifting, Inheritance Tax And Care Costs

When you are thinking of gifting it’s well worth establishing first of all who is driving this and what the motives are. Is this what Mum and Dad want? Or is this the children wanting their money now and being a bit demanding? Will Mum and Dad need the savings themselves? Perhaps to pay for care.

The whole situation needs looking at, this is best achieved by sitting down with the whole family and understanding the family dynamics, motives and priorities. In many cases the parents will want to gift as much as possible by putting their children first. But care needs to be taken in case money is needed later. If you are gifting to deprive your estate of assets thereby falling below the £23,250 mark, then the Local Authority are able to look back and if they think its deliberate deprivation then can go back and treat like its still your money. If the recipient has spent the money the whole situation could get messy. Its best to take advice, as things can go horribly wrong very quickly.

With IHT the rules around gifting are a bit more clear-cut. For example the 7-year ruling which most are familiar with. But gifting rules around care are a lot less clear-cut. Decisions are very much made at the discretion of the Local Authority. Exactly the same scenarios can be judged completely differently by different Local Authorities. Sometimes gifting is fine, sometimes it is considered Deliberate Deprivation. The general advice is to always air on the side of caution or take specialist legal advice before making gifts.  

Is There Any Way To Reduce The Cost Of My Care Home Costs?

The main way of reducing your care home costs is to choose a cheaper home, perhaps one with less activities. However, less activities can sometimes mean a less fulfilled later life, perhaps even a miserable last few years.

You need to be careful in depriving yourself of enough money to pay for the kind of care that you want. It is better to build up assets, whether that be in ISAs, bonds, savings or pensions – then at the point of needing care, if you have more money, more assets, you have more choice.

If you want to avoid those catastrophic care costs and end up losing all the assets you have built up – that’s when you look at those Immediate Care Plans. These are effectively a different form of care cost cap. However, whereas the government care cost cap was only capping personal care costs, the Immediate Care Plan covers not just your personal care but all the ‘hotel’ costs too.  

If you want to pay as little in care costs as possible and don’t care about the standard of care provided by the Local Authority, you need to be giving away assets very early. If the Local Authority get a sniff that you are gifting to avoid care fees or that you might need care, then they will simply treat you as still having the money. They can go back as long as they like.

In many ways, it’s less about reducing your care cost bill, more about exploring the different ways you can fund it. Always check eligibility for any benefits, for example if you are in a care home it’s likely that you are eligible for Attendance Allowance but also explore things like pension credit. Age UK Bristol are an excellent resource for this kind of thing. Also explore NHS Fully Funded Continuing Health Care (CHC) – it’s difficult to get outside the most severe and complex health needs but is fully NHS funded. Again if you need specialist help in applying or disputing a decision, get in touch we can sign-post you in the right direction.

Don’t forget that when living with dementia you can apply to the Local Authority for a severe mental disability exemption for council tax (and if living alone a single persons discount).

Summary

We are back playing the waiting game. Now for the latest consultation on a new 10-year plan for social care. But with another General Election in 2029 we just can’t rely on the Government to help us. The chances are that social care reform will be kicked into the long grass again. Policies are often based on who shouts the loudest and unfortunately those in care find it difficult to shout. In order that you do have a voice, even when you have lost capacity, you need a Lasting Power of Attorney in place. Get them organised without delay, we can help with this.  

In terms of planning, there is lots of info out there now through the internet and through the age of AI. But it’s not always accurate and therefore relying upon online advice meanst you couldbe acting on something that’s not correct. If you really serious about getting your ducks in a row, you need to take specialist later life financial and legal. From an adviser who is familiar with later life issues and paying for care. The outcome will be having a much better idea of actions and peace of mind. We will ensure you are less affected by all the noise and what you have seen on Facebook and more led by a specialist who is abreast of the situation and can hold your hand through the process.

Harold Stephens is a specialist, later life financial and legal planning specialist. We help families plan for later life issues such as care planning, inheritance tax, Lasting Power of Attorney and Wills. If you are facing these issues, there are specialist options available that we can recommend to you, to not only fund the care that will give them the dignity in later life they deserve – but also in a very tax efficient way and potentially put a cap on those care costs.

To help you further understand your options for care fee planning as a self-funder, we have organised two free seminars at Stoke Lodge - one on 11th November 2025 and one on 19th November 2025 - get in touch if you’d like to book your spot.

Don’t hesitate to get in touch with the office for complimentary initial chat. We can be reached at 50, High Street, Westbury on Trym BS9 3DZ, office@haroldstephens.co.uk or telephone us on 0117 3636 212.