PM pledges social care reform: Key issues for families seeking funding and planning for later life

PM pledges social care reform: Key issues for families seeking funding and planning for later life

Evelyn Partners reacts to PM speech and looks at the challenges of funding later life care and planning for self-funding costs

In a speech on his flagship drive to reform social care, Prime Minister Andy Burnham today asked Baroness Casey to bring her independent care review forward by one year, to expedite the delivery of a national care service, and invited opposition parties to agree a consensus approach to the care crisis. The speech follows a warning from the PM in a BBC interview on Sunday that the NHS 'will collapse' without social care reform. 

Lucie Spencer, Partner in Financial Planning at wealth management firm Evelyn Partners and Member of the Society of Later Life Advisers (SOLLA) comments:

'It is encouraging that the Prime Minister is determined to grasp the nettle of the provision and funding of social care. In a timely indication of the size of the challenge, data on the “very old” was released by the ONS this morning, revealing that the over-90s population of England and Wales stood at 581,414 in 2025 – a 3 per cent increase on the previous year and a 54 per cent increase on the 376,613 in this cohort just 20 years previously in 2005.

‘As we saw with the abandoned £86,000 lifetime care cost cap policy, this is a daunting task, and we look forward to the policy detail with great interest. What unnerves many of our clients and their families is the prospect of snowballing care home fees wiping out their finances and assets, and maybe even forcing a home sale.

'Hundreds of thousands of families are navigating the care-funding maze themselves, and in many cases find that they must stump up the payments, often eating though carefully built-up savings, pensions and legacies in the process. Around one in seven 65‑year‑olds can expect to incur lifetime care costs of more than £100,000. [1]

'Having an emergency fund for care in later life has been complicated by the forthcoming inclusion of pensions in inheritance tax next April, as pensions have been a very useful tax-efficient way to keep such a fund in place.

'While we wait for the new Government's attempt to grapple with complex social care issues to play out, there are some steps families can take to prepare for the possibility of self-funding care - but first they should also know the pathway through the local authority funding system, and also crucially have powers of attorney in place.'

Obtain lasting powers of attorney where appropriate

Lucie says, 'An important consideration when starting to discuss care is that you have a power of attorney in place for the elderly relative - it may not need to be used but can be a crucial lifeline if it becomes necessary. There are two lasting powers of attorney: one for health and welfare, which enables your family to decide where you live or to withhold life sustaining treatment. This only comes into force once you have lost capacity.

'The other is for financial matters and property. You can choose how the LPA works and some people opt for their attorney to become involved only if they have lost capacity to make decisions themselves. But your family can also be enabled to manage your financial affairs even if you have not lost capacity. For instance, it could be that you have capacity but find it too onerous, and would rather your family deal with more complex financial decisions or simply action your wishes if you are unable practically to manage your affairs.

'If you do not have an LPA in place then your family will need to apply for a deputyship. This can take months to come through, adding delays when decisions need to be made. Deputyships also tend to be more costly than LPAs and it could leave you with someone managing your financial affairs who you might not have chosen. It also adds an additional layer of stress and complexity during what can be a difficult and emotional time for your loved ones.'

Securing local authority funding for an elderly relative

Lucie says: 'Some families assume they will not be eligible for funding because, for instance, their relative is not old enough or there is a valuable home that could be sold, but this is often a misunderstanding. Families must grasp that local authority funding for care in England is based on both care needs and finances, and neither of these criteria is straightforward.

'Key issues to remember are:

1. Eligibility is based on needs (not age)  

'Being elderly alone does not qualify someone for council-funded care, and neither does having savings disqualify them. The local authority must assess whether the person has eligible care and support needs under the Care Act. If they do, the council has a duty to help meet those needs.'

2. There is a financial assessment ('means test')

'Once eligibility is established, the council will assess income, savings and assets. In England:

• Assets above £23,250 generally mean the person pays their own care costs. 

• Assets between £14,250 and £23,250 lead to a contribution calculation. 

• Assets below £14,250 means greater support.  

The family home may or may not be counted depending on circumstances, such as whether a spouse or certain other dependents continue living there.'

3. There is other funding available even when a care home is not needed or wanted

'Someone may qualify for support in their own home (domiciliary care), in assisted living, in a residential care home, or in a nursing home. The funding rules and assessments are broadly similar, but the cost structures differ. Funded nursing care can pay a set amount to cover some of the nursing care which an individual may require.

'Prior to going into a care home some individuals can claim a grant of up to £30,000 (in England, £36,000 in Wales) for improvements to their home if they have a disability to make a home safer and more accessible. These grants are often used for putting in grab rails or widening doors and are means tested based on income. But some councils also offer up to £1,000 non-means-tested for grab rails and ramps to be installed.

'Should you decide that you wish to care for your parents or grandparents to try and keep them at home for as long as possible, there are benefits available. Carers' Allowance can be claimed if you spend at least 35 hours a week caring for the person and earn less than £196 net per week. The person whom you are caring for must receive a qualifying disability benefit and you must be over 16 and not in full-time education.'

4. NHS Continuing Healthcare (CHC) can be overlooked

'Many families miss this entirely. If a person's primary need is a health need rather than a social care need, the NHS may be responsible for funding 100% of care costs through CHC. This is not means-tested.

'People with severe dementia, complex nursing needs, challenging behaviours or significant medical conditions should always be screened for CHC before accepting that they must fund care themselves.'

5. The council's contribution may not cover the preferred home

'If a family chooses a care home charging more than the council's usual rate, a third-party top-up fee may be required. This is one of the most common surprises for families.' 

Lucie says: 'All these considerations translate into some practical of steps that can be taken to navigate the funding pathway. There are some common mistakes that many families make, including paying privately without first requesting assessments, missing NHS Continuing Healthcare eligibility or funded nursing care, assuming the family home is always counted in the financial assessment, and not claiming benefits that could help fund care.' 

Step 1: Request a Care Needs Assessment immediately

'Contact your local authority's Adult Social Care team and ask for a Care Needs Assessment and a Carer's Assessment for any family member providing support. Do this even if you think the person may be over the financial threshold.'

Step 2: Gather evidence

'The more evidence you have, the easier it is to demonstrate needs, so prepare to dig out things like GP records, hospital discharge summaries, medication lists, occupational therapist reports, dementia diagnoses, falls history, and evidence of risks and safeguarding concerns.'

Step 3: Request a financial assessment

'Many families are embarrassed to talk about money and I hear frequently from clients that they did not know how much their parents had and they are looking through boxes of paperwork to try and find a complete picture.

'So, it is incredibly useful to have ready bank statements, details of savings and investments, pension information, property ownership details, benefits information. In fact, especially in this digital age, it is a great idea for anyone in later life – whether frail or not - to have a file containing a handy list of such info that could make life much easier for anyone who ends up having to manage such affairs - or ultimately the winding up of an estate.

'Be very careful if the person who might need care is considering giving away assets or transferring ownership of property in an attempt to avoid care fees. Councils can investigate "deprivation of assets" and may still treat those assets as belonging to the person. This can cause problems if the gifts have been used for paying off a mortgage or spent - as in some way they will need to be paid back.'

Step 4: Check attendance and disability benefits

'When I meet with either clients or attorneys where care is becoming a concern, I ensure that they know what benefits they could be entitled to. These can significantly help with care costs, should be reviewed as part of the funding plan, and include Attendance Allowance, Pension Credit, Housing Benefit, and Council Tax reductions.

'Often elderly people overlook such benefits as they assume the savings or other assets mean they are not eligible. For example, Attendance Allowance is a benefit that depends on the amount of care required and is not means tested, so many eligible individuals do not claim it.'

Step 5: Ask for an NHS Continuing Healthcare screening

'Ask a nurse, doctor or your local Integrated Care Board to have a Continuing Healthcare Checklist completed. Many people who are ultimately unsuccessful still benefit from having the assessment undertaken because it clarifies the level of need.'

Step 6: Get everything in writing

'If you disagree with a decision, written records make appeals much easier. Request copies of care assessments, financial assessments, eligibility decisions, and care and support plans. It is possible to challenge decisions that you think are poor or misguided.'

Planning for self-funding of care

Lucie says: 'Paying for care is one of the biggest concerns among my clients, and many want to ensure they can afford it without burdening their children. So as part of conversations about, for instance, lifetime gifting to mitigate inheritance tax, we use cash-flow modelling to ensure that there will be enough money left over to cover any care costs.

'This issue becomes more difficult next April when unspent pensions become liable to inheritance tax. In recent years, pensions have been a very useful option for those who wanted to keep in place an emergency fund for care in later life. That is because, as long as other assets could be drawn on to fund retirement, a pension could be left partly or wholly untouched without having to worry about it being taxed at death.

'So, in later life the pension could either be used to fund care, or if not needed for that, then to pass on wealth tax-efficiently at death. Some older savers might have to rethink that strategy from April 2027, and structures like trusts are becoming more sought after. However, pensions can be a useful tool to pay for care home funding because of how they are assessed by the local authority, so financial advice should be taken before making drastic changes.

'I recommend that clients look around care homes to see how much they cost and where they would like to go. They can then inform their next of kin or attorney to ensure that they know their wishes and how much it will cost.

'If your parents go into care, you are not obliged to pay for the care home fees, and the first step is to seek assessments and support as detailed above. If your elderly relative starts off self-funding but it is likely to run out of money and drop below the £23,250 threshold, then ensure the home they are in takes council funded residents to avoid the need to move in the future.

'The council will allocate each person a personal care budget and if you wish for your parents to stay in a care home which charges more than the council will pay, there may need to be a top up amount funded, and that could come from the person's savings or income, or from a third party.

'When, or preferably well before, a loved one goes into care, I recommend that the family speaks with a qualified financial adviser to discuss how best to cover these costs. They can discuss with you what funding is available and how to go about claiming it, and can offer practical advice around, for instance, how defined contribution pensions are treated when the income assessment is conducted, potentially saving a fortune in tax and unnecessary spending.

'They can also offer advice on specific products like an immediate needs annuity, which is an insurance product that can pay care costs for the rest of an individual's lifetime.'

Can an annuity help meet the challenge?

Lucie says: 'Immediate needs annuities – sometimes referred to as "care home annuities" - are an insurance product which pays for an individual’s care home fees for the rest of their lifetime. They are available to anyone who is receiving care either in their own home or in a care home, and who is liable for paying for their own care.

'The main way they differ from pension annuities and a key benefit is, if they are paid directly to a registered care provider, then they are free of income tax.

'They are medically underwritten, and the providers will usually request medical reports from the individual’s GP and from the care home where they are resident. This is obtained through completion of a medical questionnaire and collated by a central company called Medicals Direct.

'You can add additional features such as capital protection up to 75% of the initial sum paid out ensuring the client's estate receives 75% of the initial annuity cost minus however much has already been paid out to the care home. Annual increases in the amount paid can be included to cover care cost inflation, with indexing following an inflation measure or an agreed fixed percentage. These extras will mean you either have to pay more or accept a lower starting income for the same sum.

'Whether they provide value for money is only ever known in hindsight as it very much depends on how long someone lives for. However, they can provide peace of mind first that not all an estate will be spent on care home fees, and second that the client will be able to stay in their preferred home rather than relying on state paid care.

'Immediate needs annuities can also be useful as an inheritance tax planning tool as they will immediately reduce an individual’s estate by the amount which is paid out.

'Advisers need to take additional qualifications to provide advice on these products due to the vulnerability of the clients and the products' unique features. Look out, ideally, for financial advisers with accreditation from The Society of Later Life Advisers. These types of annuities can only be provided by accredited financial advisers and cannot be brought direct by individuals due to their complexity.

'Professional advice can be vital to explore the best options on how to pay for care, and where the crossover point is between funding from investments or cash or purchasing an annuity, so that individuals and their attorneys can make an informed choice that doesn't leave them worse off than they need to be.'

NOTES
[1] Department of Health and Social Care's modelling of lifetime social care costs, produced as part of the government's work on introducing a cap on social care costs (the Dilnot-inspired reforms announced in 2021).