How can long-term care be paid for?

According to new research, six out of ten people over 45 underestimate the annual cost of self-funding a care home by thousands of pounds

We examine how to pay for long-term care, whether you're thinking about taking care of an elderly relative or making plans for yourself.

According to recent research, the majority of people over 45 are not aware of the actual cost of paying for a care facility, which implies a significant underestimation of the cost of entering care.

According to a report for the Just Group Care Report 2025: Social Care Reform Stuck in the Waiting Room, up to 85% of people who had previously assisted in finding care for a loved one were shocked at the cost. Private care can be paid for with pensions, savings, and property wealth.

According to the report's data, over half (60%) believe that a year's worth of residential care costs less than 60,000. This is much less than the 66,456 industry estimates for self-funders.

Less than half of the actual amount, more than three out of ten (31%) predicted that the annual cost would reach £30,000. Thirty-two percent of respondents thought it would cost more than £70,000 annually.

"Year after year, our Care Report shows people are unprepared for the true cost of care, and those who do have experience with the system are shocked at the level of fees when they come to help loved ones find a residential home," stated Stephen Lowe, group communications director at Just Group.

Millions of families are sleepwalking toward a terrible shock because it is estimated that four out of five people over the age of 65 will need some sort of care before they pass away. A "

Over-55s are most concerned about care costs.

One of the main issues facing people over 55 is the cost of care, which forces many to work long past the state pension age in order to pay for it. Additional expenses can amount to thousands, whether you believe you may require care or you must think about it for an elderly relative.

According to a 2023 Canada Life study, of the third (37%) of over-55s who say they will work past their state pension age, a fifth (20%) say this is because of worries about long-term care costs, which rank among the top five concerns of those who are likely to work past their retirement age.

Even though some people may be able to rely on their pension or ISA to pay for care, it's important to have a clear idea of how much this would cost to ensure you have the money to cover it.

What is the cost of care?

Social care is paid for by you, but medical care is provided by the NHS.

The NHS states that the average hourly rate for a carer to come to you is about twenty, though this will vary depending on your location.

The cost of a live-in carer starts at about 800 and can reach 1,600.

The cost of residential homes without nursing care is about £700 per week, or £36,400 annually. The cost of nursing homes, which provide round-the-clock care, is approximately 850 per week, or 44,200 annually. These NHS estimates are much lower than the 66,456 per year that industry experts report, but costs will vary based on where you live and the care you require.

How do I finance my care?

Care can be paid for in a number of ways. Finding out how much you need is the first step. That will change based on a number of factors, including the provider, your needs, and the location.

"There are some great online calculators which will help work out care costs," says Canada Life UK's head of marketing communications, Alice Watson. "A lot depends on your unique situation, such as whether you need assistance at home or if you or a loved one need assistance in a care facility. The "

To estimate the potential cost of your care, use Paying For Care's care cost calculator.

"Much will also depend on the level of support provided, the individual provider costs and even the area in which you live," Watson says. "You might also want to ask your local authority's adult social care team to evaluate your care requirements and financial situation. The "

According to Watson, "getting guidance from a regulated financial adviser who specializes in care costs is an important first step." "An adviser can help you figure out how to pay for care expenses while also making sure you don't run out of money. Any discussion should include talking to family members, particularly if you are thinking about using property equity to cover care costs. A "

One.

Deferred Payment Schedule. A Deferred Payment Agreement may be available through your local government. If you have less than £23,250 in savings and all of your money is invested in your property, you are qualified for a loan or arrangement with your local government.

The council will determine whether to contribute to or pay for your care home after a means test that considers your earnings, pensions, benefits, savings, and property. You can repay the money when you sell your house or after you pass away.

To find out whether you qualify for a deferred payment plan, contact your council.

Two. Put your house up for rent.

If your property is vacant when you move into a care facility, you could rent it out to help pay for the facility's expenses.

However, renting has a unique set of problems. You will have to deal with the obligations of being a landlord, even though it might provide a steady income stream. It might be more feasible if you can recruit family members to assist. However, if it's just you, think about whether you want to take on this responsibility.

Three.

Release equity or sell your house. Homeowners over 55 can release cash by borrowing against the value of their property through equity release products. When the house is sold after the death, this is paid. However, interest compounds rapidly, so your loved ones may end up with a large bill.

Downsizing or selling your house are other options. Both options have expenses of their own, but you may be able to pay for your care with the money you make from a sale.

#4.

Utilize investment income or your pension. Taking money out of your pension is probably the most obvious way to pay for your care. Normally, you can start receiving your private pension at age 55 and your state pension at age 66.

Annuities are another option. Thanks to more favorable interest rates, annuity rates recently reached a 14-year high.

An annuity can be purchased with all or a portion of your pension fund. You can decide when to purchase it and keep contributing to your pension fund even after you've done so. Remember that the income is taxable, and you can buy a variety of annuities; consult a financial advisor to determine which would be best for you.

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