Planning for Care Fees: How to Prepare Without Putting Life on Hold

How to fund long-term care has been a public concern for decades, but successive attempts at reform have not produced a lasting solution. In 2011, it was recommended that a lifetime cap of £35,000 be applied to an individual’s eligible care costs. A cap was later written into law, but implementation was repeatedly postponed. In 2021, the government proposed a new cap of £86,000, but after further delays the reforms were cancelled in July 2024. Even if introduced, the cap would not have covered every expense, such as accommodation and everyday living costs in a care home. It would, however, have made some costs easier to anticipate. Under the current system in England, there is no lifetime limit on the amount a person may have to contribute, which makes forward planning particularly important.

How much might care cost?

There is no single figure that represents a typical care bill. Some people need short-term support after an illness, while others require help at home or spend several years in a care home. The total cost therefore depends on the type of care required, how long it is needed and where it is provided.

As a broad guide, current industry data[1] puts average self-funded care-home fees at about £1,300 a week for residential care and about £1,500 a week for nursing care. That is roughly £67,600 to £78,600 a year respectively. Actual charges vary considerably by region, provider, facilities and the level of support required. Fees have also risen sharply in recent years, so any long-term plan should allow for future increases rather than rely only on today’s prices.

What support is available, and how can financial planning help?

The starting point is to understand your complete financial position. This means asking what income would continue if you needed care, what a partner would still need to live on, how care costs might rise and how much you would ideally like to leave to family. Financial planning can model different care scenarios alongside your preferred retirement spending, helping you see whether your plans remain affordable if your circumstances change.

This exercise can give people greater confidence about both current and future spending. If your plan can withstand a range of demanding care scenarios, you may feel more comfortable enjoying your money now rather than holding everything back for an uncertain future. If the modelling reveals a potential shortfall, identifying it early gives you more time to consider how it might be met.

Gifting can also form part of the conversation. Helping family or friends during your lifetime may feel more rewarding because you can see the difference it makes, but any gift must remain affordable. Before giving money or assets away, you should be confident that you can still meet your own needs, including possible care costs. Gifts should not be treated as a way to avoid paying for care. If a local authority later decides that an asset was given away deliberately to reduce care charges, it may assess you as though you still owned it. The authority will consider your circumstances at the time, including whether you could reasonably have expected to need care and support, whether you could reasonably have expected to contribute towards it, and whether avoiding charges was a significant reason for the disposal. There is no fixed look-back period and the seven-year inheritance-tax rule does not apply to care fees. Substantial gifts made when future care may be foreseeable should therefore be discussed with a financial planner or solicitor before any decision is made.

It may also be sensible to review how your property is owned and what your will says. If a couple owns their home as tenants in common, each person owns a defined share and can leave that share under their will, potentially to a trust while still making provision for the surviving partner. This may support inheritance planning, but tenants-in-common ownership does not by itself protect either person’s share from future care costs. The survivor’s circumstances, the trust terms and the relevant care and tax rules will all affect the outcome. Any change to property ownership or wills should be made with advice from an estate-planning solicitor. Trusts may be useful in some circumstances because they allow trustees to manage assets for named beneficiaries under agreed terms. However, placing assets in trust is not the same as giving them away while keeping unrestricted access to them. A transfer made specifically to avoid care charges may still be challenged under the deprivation rules.

Additional help that may be available

Some care may be funded by the NHS. NHS Continuing Healthcare can cover a complete package of ongoing care in a person’s own home or a care home when they are assessed as having a primary health need. Eligibility depends on the nature, intensity, complexity and unpredictability of the person’s needs, not on a particular diagnosis or their finances. If someone is not eligible for NHS Continuing Healthcare but needs care from a registered nurse in a nursing home, NHS-funded Nursing Care may instead make a contribution towards that nursing care. Short-term rehabilitation or reablement support may also be provided free of charge, usually for a limited period. These are separate forms of support with different assessments, so it’s important to establish which one may apply.

If NHS funding does not apply, the local authority can assess both the person’s care needs and their ability to contribute towards the cost. In England, local-authority support is means-tested, and the treatment of income, savings and property depends on the person’s circumstances and where the care is provided. Different charging rules and thresholds apply in Wales, Scotland and Northern Ireland, so readers elsewhere in the UK should check the arrangements that apply to them.

Funding options when care is needed

Once the likely fees and available funding are clearer, an immediate-needs annuity may be worth considering. In return for a lump sum, the policy pays a regular income towards care for the rest of the person’s life. Payments are tax-free when made directly to a registered care provider for the policyholder’s care. Some policies can increase their payments over time, although this costs more, and capital protection may be available for an additional cost. The main trade-off is that, after the cooling-off period, the policy generally cannot be cancelled to recover the lump sum, and care fees may rise faster than the policy income. An annuity may therefore be used to cover part of the cost, with cash or investments retained for other expenses and future increases.

Our July case study shows how this can work in practice. Following a bereavement, a family wanted reassurance that their mother’s care would remain affordable. After her needs had been assessed, the plan combined a long-term care annuity with cash for additional expenses and invested funds that could help meet future fee increases. The result was not simply a financial product. It was a clear plan that helped the family understand how the care would be funded.

It is also worth reviewing any existing protection policies and considering whether further cover is appropriate while you are healthy enough to apply. Critical illness insurance can pay a lump sum if you are diagnosed with one of the conditions listed in the policy and meet its definition. It does not pay simply because you need residential care. Entry ages, policy end dates, definitions and exclusions vary between insurers, so critical illness cover should not be viewed as a general solution for care fees.

A plan that makes room for life now

Good care planning rarely depends on one product or legal arrangement. It brings together your wishes, possible sources of public support, income, savings, investments and the needs of the people you want to protect. It is also sensible to put lasting powers of attorney in place while you have mental capacity. A property and financial affairs LPA can allow trusted attorneys to help with financial decisions, potentially while you still have capacity if the registered document permits it and you agree. A health and welfare LPA allows attorneys to make relevant decisions only when you no longer have the mental capacity to make them yourself.

At Colmore Partners, we can help you understand how these pieces fit together and work alongside your solicitor where legal advice is required. The aim is to make informed decisions about the future without allowing the possibility of care to stop you living well today. If you would like to discuss your own circumstances, please get in touch.

This is an example only and should not be taken as personal financial advice. Everyone’s circumstances are different, and what may be right for one person may not be right for another. It is important to seek professional financial advice before considering your options.

Colmore Partners is an Appointed Representative of Best Practice IFA Group Limited, which is authorised and regulated by the Financial Conduct Authority under registration number 223112.

This article is provided for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial product. For guidance, seek professional advice.

This article does not constitute tax, legal or financial advice and should not be relied upon as such. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future. For guidance, seek professional advice.

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.

Note that life insurance and financial protection plans typically have no cash-in value at any time, and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

Annuities are long-term, complex financial instruments that may not be suitable for all investors. All investments carry risk, and annuities are no exception. The performance of an annuity is not guaranteed and can be affected by market conditions and other factors. It is essential to carefully consider your financial situation, investment objectives, and the product’s fees and restrictions before purchasing an annuity. Always seek professional financial advice.’

[1] Lottie: Care Home Costs & Care Fees UK Average For 2026