By Peter Seldon, CEO, Consultus Care and Nursing and member of the Live-In Care hub
The Coronavirus pandemic has certainly shone a spotlight on adult social care, from the heroic efforts of careworkers, to care providers going the extra mile to ensure the safety of their clients. Unfortunately, at the opposite side of the scale, is the fact that Coronavirus has highlighted just how flawed the social care system is. From Government failures in providing adequate testing and PPE for the social care industry, to elderly hospital patients being released early into care homes while infected with Covid-19. The impact of these failings has been and is, devastating. Particularly within care home settings where despite the heroic efforts of their staff in many cases, there has been almost 30,000 excess deaths. Care home Coronavirus outbreaks are still being reported, and with winter fast here, it’s likely that we’ll witness even more outbreaks and deaths.
Meanwhile, some families are unable to visit their loved ones in many cases which is heartbreaking, so much so that some families are going to the extraordinary lengths of moving frail loved ones out of their residential carehome setting.
Recently, it’s been reported that more than 300 homes are being sold each week to fund adult social care, a bitter pill to swallow at any given time. But families are now faced with an even more impossible decision: elderly parents require professional care intervention, but who wants to sell the family home to put them into a care home setting at such an unprecedented and worrying time?
It doesn’t have to be this way. Peter Seldon, Live-In Care Hub, and Matthew Jefferies, Responsible Life, explain that not only can the family home, which is most likely to be the family inheritance, be sustained, importantly, one can be cared for in their own home – the safest, and the preferred choice of care for so many.
Lack of awareness
By 2030, one in five people in the UK will be aged 65 or over, and interestingly, the fastest growing age group is those who are 85+ which is set to double to 3.2 million by mid-2041 and treble by 2066. Yet, the majority of people don’t plan for later life care.
So, when families come to realise that a loved one can no longer safely live independently, it creates a huge emotional toll on the family. Moving a vulnerable parent out of a much-loved home into residential or nursing care is typically a last resort decision. And these decisions are often made in haste not only due to a lack of planning but also because elderly parents do not typically want to be a ‘burden’. They will often try to hide the extent of their decline until it reaches a critical level – no surprise given that 75% of retirees are reluctant to sacrifice their homes to fund later life care which currently is often a care home by default.
Such decisions are usually made without awareness of the full range of care solutions available. Parents want to leave a nest egg to their children and grandchildren, who quite possibly have been banking on that inheritance. But for many families, when the time comes that a parent can no longer manage alone, it appears the default option chosen is residential care – and that means selling the family home to finance the move. The funds are then usually put on deposit at close to zero interest, and when the money goes, the family has limited options to fall back on the State which still underfunds social care in this country.
All of this is understandable when you consider how hard it is to find information when it comes to care funding options. How many people know, for example, that an individual diagnosed with dementia is immediately exempt from Council Tax? And that they are also entitled to an Attendance Allowance of £58 – £87 a week which can be spent on care, cleaning or any other support service? Every local authority, every county, has different funding criteria. Without a single source of easily understood information, it is no surprise that some families make decisions when there are other options which could work better for the whole family.
Better at home
The Coronavirus pandemic has accelerated the numbers of people who are now exploring other options, including live-in care, as an alternative to moving a parent into a care home. 71% of adults wish to remain in their own homes in later life, not surprising given the numerous physical and emotional benefits that staying in your own home presents. For example, the risk of falling and in turn sustaining a hip fracture is almost a third less likely to occur in one’s own home than in a care home. And, importantly, one’s happiness is far greater while receiving live-in care with 97% of people receiving care in their own home saying they do something they value and enjoy compared to just 5% in residential care.
However many assume that a professional live-in carer providing 24×7 support would be unaffordable, but in fact the costs are typically on a par with residential care for an individual, and radically less expensive for a couple. With a parent still living at home new financial options open up, such as the use of increasingly competitive equity release products, including those known as Lifetime Mortgages, to fund care.
Debunking equity release
For those who have investigated – and dismissed – equity release in the past, it is worth taking another look. The initial generation of products included high rates of roll-up compound interest that over a lifetime often eroded the value of the property entirely, leaving the next generation with nothing. This is no longer the case; products from members of the Equity Release Council guarantee that you will never owe more than your home’s value and are now more flexible, with a wide range of Lifetime Mortgages available, meaning that there is likely to be a plan to suit your individual circumstances. Typically there are two main types: the lump-sum and the drawdown. The main difference is in the way that you can access tax-free cash. Both types of product can also contain a variety of flexible features.
Firstly, a Lump-Sum Lifetime Mortgage allows you to access your equity as a tax-free cash lump sum. The equity is released directly into your bank account and once any existing mortgage debts are cleared, the cash is yours to spend entirely as you wish. The capital released by a Lump-Sum Lifetime Mortgage is an effective way to boost your retirement finances by ridding you of monthly mortgage payments, leaving you with more of your money to enjoy.
Secondly, a Drawdown option allows you to release a smaller initial tax-free lump sum, whilst creating an interest-free reserve for use at a later date. As you only pay interest on the equity that has been released, this is a good option for those looking to mitigate the build-up of interest in their plan. A Drawdown Lifetime Mortgage is an ideal option for those looking to provide themselves with the financial flexibility to make the most of that ‘lightbulb’ moment in the future.
And thirdly, both types of Lifetime Mortgage might come with a variety of flexible options, including those that allow you to make voluntary payments of up to 10% of the loan each year without penalty, which can again offset the costs involved. What’s more, if in the future you no longer wish to make the payments, the mortgage simply reverts to the standard roll-up of interest, with the interest increasing monthly. There are no penalties for missed payments with a Lifetime Mortgage, meaning there is no risk of repossession.
Additionally, there are even some plans available that allow you to ring-fence a portion of your equity. This means that for those of you concerned about providing a guaranteed inheritance to your nearest and dearest, you can ensure a portion of your property wealth is passed on to them once you pass away.
With all Lifetime Mortgages however, it is important to be aware that releasing equity will reduce the value of the estate and could affect any entitlement to means-tested benefits.
In most cases, the family home is the inheritance. It is enraging to have to sell that asset, put the money into a low interest savings account and then watch cherished hopes for a first step on the property ladder or a chance to pay off the mortgage disappear. It is possible to fund care whilst also retaining that asset.
And of course, the cost of care will erode any inheritance – that is a given. But retaining the family house can provide a chance to allay some of that cost through an increase in property values over time. It also gives a parent comfort that they are leaving something to their children and grandchildren. Moreover, choosing to release equity with a Lifetime Mortgage to fund live-in care gives children and families peace of mind that their loved ones are not only receiving the safest option of care, but the one that makes them the happiest in their final years.