Life expectancy is increasing rapidly. Over the last 50 years, the average life expectancy across England and Wales has increased approximately 10 years for men and 8 years for women. Meanwhile, the rate at which healthy life expectancy (the length of time we can expect to live without incurring significant health problems), is increasing less rapidly.
Whilst we’re all living longer, the cost of living in a care home has risen by 5.6 per cent– more than twice the rate of inflation. According to research compiled by Prestige Nursing and Care, the average annual UK bill for a care home room is now a massive £27,404.
So, with the statistics looking like they’re against us, the question is: what can we do to save money for our care home fees?
Put into your company pension plan
Perhaps stating the obvious, but looking into your company’s pension plan is the easiest and most invisible way to start accruing resources to cover care home fees. It’s never too early to start, and because you never have it in your account to begin with, you’re less likely to know it’s there until you need it.
Put money into a savings account
Aside from a company pension plan, putting aside a private nest-egg to save money for retirement can provide a valuable second resource for when the time comes to give up work. Even a savings account with a low interest rate will, over time, add up to a significant amount. Assuming the average person needs to work for around 40 years of their life, setting up a direct debit of just £60 per month when you start work can add an additional year of care home fees plus interest to your retirement pot.
Make tax-efficient withdrawals to stretch the life of your savings
Once retired, one way of ensuring your assets last as long as possible is by drawing money for everyday living from taxable accounts first and foremost. This will allow tax-advantaged accounts to compound for as long as possible, ensuring you get the absolute maximum from your savings.
Sell your house
If you own your house then selling up when the time comes is a really easy way of covering off a big chunk of your care home fees. If the housing market is down when you need to access money, or you’re reluctant to sell up for personal reasons then there are options available. Releasing equity from your property is a way of getting cash from your property that is not repayable until it’s sold.
However, depending on circumstance, releasing equity is not always the best option. It’s important to take independent legal and financial advice before deciding to release equity from your home.
Invest on the stock market
Work with a brokerage to set up an investment portfolio that will build over time. It is possible to manage your portfolio yourself, but by seeking professional advice a broker should be able to recommend the right investments for your circumstance. For example, a young person who can afford to take risks may be advised to take a different portfolio than an older person who needs to steadily maximise what they have.
Find out about your benefit entitlement
More than £5 billion of means-tested benefits go unclaimed by older people every year. The NHS Continuing Care program has been established to help alleviate the financial deficit that elderly UK residents incur in later life by working to provide assistance to those who qualify under a stringent set of guidelines. Through this program, the NHS are obliged to fund the full cost of care, including accommodation and nursing costs if you live in a care home or pay for nursing care at home.
So, when it comes to saving for care home fees, time is of the essence. The sooner you start, the more chance you have of building up a reasonable sum without having to incur a hefty monthly deficit from your salary. But if you’re now considering relocating to a care home and are worried about the fees, some of the above options are available to help you maximise your finances.