How to plan for your long-term care

This is often seen as a good time to be a pensioner. The real value of the state pension is protected by the so-called "triple-lock", and elderly home owners have enjoyed huge property price gains. But one major cost associated with old age has rocketed. The fees demanded by residential care homes have risen by a whopping 259% since 1988 more than double the rate of inflation (up by roughly 98% over the same period). And now our cash-strapped government seems to have shelved a plan to cap lifetime care costs at £72,000.

Despite its prominent spot in the Conservative Party's election manifesto, the policy was recently pushed back to 2020. The point of the policy was to put people's minds at rest by giving them some sort of cap on their lifetime care costs to help with planning (even if the headline figure £72,000 was in practice a lot lower than the reality). But experts are increasingly sceptical about it ever materialising. At a cost of £6bn over the course of five years, it could simply be too big a burden for ailing local councils.

There were also plans to introduce more generous means-testing. At present, if you have assets worth more than £23,250 (including the family home if no one else lives there), then you have to pay your own bills. This would have risen to £118,000 under the new rules. But that looks unlikely to happen too. As James Lloyd of the Strategic Society Centre think tank told The Daily Telegraph's Teresa Hunter: "If you are unlucky enough to need a long stay in care, your assets will be whittled away."

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So how can you plan for long-term care? The rules are complicated, but those who have a disability or complex medical problem are still likely to have their care needs met by the NHS. Councils do have some discretion, and there are other benefits available for those who need care. But those better off and in better health will very possibly have to pay their own way. Options include an immediate-need annuity, notes The Daily Telegraph. But it's not cheap "a 75-year-old with Alzheimer's would have to pay £170,827 to protect £20,000 worth of annual fees... and £326,693 to protect £40,000 annual fees until they died".

A better option is the deferred payment scheme. But it's only for those with assets below £23,250 (excluding the value of the house) allowing you to defer payments until after you die, and your house is sold. Interest and administration charges currently stand at 2.25%. Moving in with relatives and being cared for in your own home are other options. We'll be looking at this in more detail in a future issue but with the government's finances unlikely to improve any time soon, we certainly wouldn't hold out for any more help from that direction.