The cost of care

It's difficult to predict how much care will cost because you don't know how health problems might evolve over time. People who are moderately wealthy have a fair chance of living into their nineties. The goal is to determine where the funds will come from to pay for carer assistance if it is required. Making an approximate estimate of the costs can help jump-start ideas and discussions.

To make a forecast, you should first:

• Estimate annual home care or nursing home costs
• Add daily expenses
• Know the annual income level
• Check that all benefits have been claimed

The cost of care services, like care homes and home care, can vary widely depending on the provider. Hourly rates for home carers typically range from £27 to £40, while 24/7 live-in support costs around £80,000 per year. For self-funded care home residents, the average fee in 2023/24 was £1,232 per week. Costs also differ by region—for instance, care in the south-east of England tends to be higher. The table below highlights these regional differences to give you a clearer picture.

Here's an example annual calculation. Please keep in mind that this is just a guide and is not meant to replace qualified financial advice.

• Live-in carer cost: £80,000 per year
• General expenses and overheads: £12,000 per year
• Annual income: £28,000
• Attendance allowance (claimed): £5,291 per year

In summary: £28,000 plus benefits of £5,644 results in a total annual income of £33,644.

Income is £33,644, but with annual spending at £92,000, there’s a shortfall of £58,356.

To cover this gap, there are assets totaling £560,000, including £50,000 in cash, £360,000 in property, and £150,000 in investments. Each year, £58,356 will need to be generated from these assets to bridge the financial gap.

You could apply to the local authority for free or partially funded services, provided the qualifying criteria were met. Learn more about local authority funding here.

• You could apply for free home support services from the NHS, but only if the qualifying criteria were met. Find out more about NHS Continuing Healthcare funding here.
  
• You could spend the cash.
• You could make investments to generate a sufficient return to cover the costs.
• You might think about purchasing a care fee annuity. This is when you use some of the money you have today to ensure an income that will pay your care costs for the rest of your life (the initial investment is considerable).
• You could get money out of non-liquid assets like real estate (this is known as equity release).
• You could take one of the preceding routes or a combination of them.
• Even if a family member expects to take on the position of primary carer, the impact of their reduced income (perhaps due to only being able to work part-time) or total loss of income from needing to give up employment should be factored in as a yearly expense.
• This big-picture view will help you find any significant budget gaps and see what choices you have.

A financial adviser can help you plan for the costs. Expert advisers will know about all the options and have up-to-date information about protection policies. If you don't have a financial adviser and want to find one, let us know and we'll send you an email with a list of local experts.  Initial consultations are usually free.

Because of the rising cost of funerals, one-fifth of all UK funerals are now paid for in advance with a prepaid funeral plan. The average cost of a basic funeral is now about £4,000.

Purchasing a funeral plan protects against the expense of inflation because the prices are fixed at the time of purchase. Purchasing a plan in advance relieves families of the financial, emotional, and organisational burden.

And, once paid for, the value of the plan is not included against the total value of an estate, so it is exempt from inheritance tax and means- testing (unlike money in a savings account, which forms part of an estate).

Check the Financial Services Register before buying a plan to make sure the company is listed and has permission to "enter into a funeral plan contract". Look under the heading "What can this firm do in the UK?" Check here.

Moving to another part of the country can invalidate funeral plans. Check in the plan how far the funeral director will travel to get a body. Some providers will let you use another funeral director if necessary; however, some could charge an additional fee.