Backto basics

Your client will see planning a retirement in positive terms, as we all will when the time comes. Holidays, leisure, grandchildren. Why cloud the blue sky with a topic called long term care?

Because if you do not, and you don't persuade your client to do the right kind of planning, retirement could be a lot cloudier than he or she would like.

Much as we hope it won't happen to us, the fact is not everyone remains healthy, in both body and mind, until death. According to the Census in 2001, millions of retired people need some form of help in their own homes. Figures from Laing & Buisson, suggest that almost half a million people can no longer manage at home, and instead live in care homes.

The possibility of needing help in retirement is not something that can be ignored. Given the likely profile of your clients, two things are certain.

One is that if they need help, they are likely to want to carry on as before. This means living at home for as long as possible and getting around as much as they can. It also means exercising choice ' in relation to the help they get, and their helpers.

Another certainty is that help costs money and your clients may have to provide most of it, which is why you have to dicuss the subject. What you need to make sure is that the money needed by your client will be available.

According to the The British Nursing Association's (BNA) figures for 2003, the cost of help at home is likely to be a minimum of around £10 an hour if arranged through a reputable agency ' more in London and some 'hotspots'. The cost of a care home place is unlikely to be much less than £20,000 a year ' according to Laing & Buisson's 2003 figures ' and could be double that in parts of the South East.

So, just hoping that finances 'will run to it' if your client does need care sounds risky.

We live in a Welfare State, so if our health does falter, we are not left entirely to our own devices. Our Welfare State is means-tested however, so what we cannot expect is to have all our care costs paid for ' State provision is geared to need, not preference. The cash benefits from the State noted below relate to Attendance Allowance which applies to disabled people aged 65 or over.

What will the State do?

• If your client needs care, their local authority will assess their needs for free. It will be an assessment of what is needed, not what is preferred.

• The Government will make a financial contribution towards the cost of the help needed. This will be a maximum of £57.20 a week ' assuming your client needs outside help day and night and £38.30 if only daytime help is needed. This excludes care homes in Scotland. In most parts of the UK, £57.20 pays for less than one hour's agency-provided help at home each day.

• If your client is at home, and needs medical services from the NHS, these are provided free of charge. This applies to people of all ages.

• If your client is at home their local authority will arrange the help it considers is needed, and which it is able to provide. Only in Scotland will it provide and pay for what is needed at no cost. Otherwise, your client may have to pay for these services. One and a half hours a day is often considered to be 'intensive care' services.

n If your client needs to go into a home and needs nursing care, the NHS will pay this part of the total bill. The amount depends on location and the need for nursing care. The maximum anywhere in the UK is £120 a week. The remaining costs of the home could be £30,000+ a year, depending on where your client lives.

n If a person needs to go into a care home, the local authority will pay the cost of 'personal care'. Only in Scotland, will the local authority pay £145 a week towards the total cost of the care home.

Which leaves your client paying for what?

n If he or she is in their own home: Except for personal care in Scotland, the cost of any care services 'they can afford to pay'. Any help or care that the local authority does not assess them as needing. Any extra help they want, either particular services, or more of any service they already receive.

n If he or she is in a care home: Except in Scotland, all of the bills except for the minority element that relates to nursing care.

At this stage, go back and look again at the cost of both sorts of care. Whether your client is at home or in a home, they are going to have to find significant amounts of extra money each year if they do find they need help.

There are exemptions, although most people wouldn't want to be an exception on either count. Some individuals' care needs are so intense that they remain the responsibility of the NHS ' even in a care home ' and have the bills for the care they need paid in full. A person committed under Section 3 of the Mental Health Act who, as a result, is being looked after in a care home, also has the bills for the care they need paid in full.

Rule of thumb

In terms of future planning, it is clear that no-one knows till they get there if they will be one of these exceptions, so there is little point in your client banking on being an exception as a method of providing for care costs.

The phrase 'can afford to pay' means slightly different things in different parts of the UK, though for many or most of your clients, these limits are really irrelevant. Most rise each year in line with inflation, but in Scotland ' where the State pays for more care ' it has compensated somewhat by not increasing the limits for the last two years.

As a rule of thumb most of what your client would regard as savings and investments counts towards their means test limits. Their car will not count, nor will the day-to-day contents of the family house. However, their stocks and shares will, including holdings in family businesses, as will Isas, Peps and bank and building society accounts. Any in joint names with a partner, are split half and half.

Curiously, the value of a life assurance bond does not count ' though it does if it is bought with the idea that this will get round the rules.

While the family house does not count as long as one of a couple lives there ' or if it is home to a qualifying relative ' it is worth bearing in mind that every couple eventually ends up as a sole survivor. And in those circumstances, the value of a house owned by that survivor does come into the equation.

Freedom of choice

Your clients are likely to find that they may have to pay for much of their help themselves and, in practice, they would usually want the choice and freedom that paying oneself ' as opposed to getting someone else to pay ' provides.

For anyone who wants independence, control and the freedom to choose if they ever need care, and who does not want to use their own money, they need to arrange an insurance plan to provide the extra income needed to pay for their help.

Why consider anything else? Why look at schemes which may or may not work in an attempt, for example, to put the family home outside the scope of the means test? Local authorities can simply 'add back' the value of assets hidden and, in any event, does your client really want to depend on local authority provision?

As I recall, the expression is 'he who pays the piper calls the tune' ' and I am sure all your clients would rather listen to their own choice of music.

Chris Ellicott is technical support manager at Age Concern Financial Partnerships