Paying for care – How you can keep hold of your assets

4th June 2013

This was written for Care to be Different, a company that specialises in providing information about NHS funding – to help you avoid being wrongly charged for care.

The article highlighted one aspect of care fees planning and care fees means testing that you may be unaware of, and yet that could save you thousands of pounds.

It begins …“So, let’s say that you’ve contacted Care to be Different but have found out that, regrettably, the NHS are not prepared to cover the cost of care for you. In these circumstances you then fall back on your Local Authority and the dreaded means test.

How does this means test work?

Here are the essentials of what you need to know about the means test as applicable in England & Wales:

Assessable savings & capital:

Greater than £23,250 – You pay all care fees

Between £14,250 & £23,250 – You share cost of fees with Local Authority

Less than £14,250 – The Local Authority pays all fees

Remember – this only applies if you do not qualify for NHS Continuing Care funding.

So, based on these details most people would think that if your capital and savings exceed £23,250 then you have to cover the whole cost of care for yourselves.

Is this right? Actually, the answer is – not necessarily!  As with most things in life, it depends upon how and where you hold your capital and savings. To illustrate the point let’s look at 2 examples where the care fees due to be paid are £36,000 per annum:

Unlucky Alf

He’s got savings of £200,000 all held in bank accounts.

His assessable capital and savings exceed £23,250 and therefore he has to pay all of his care fees himself.

In this example his savings are virtually wiped out after 5 years in the home. Once his assets reduce below £14,250, the Local Authority will pick up the whole care fees tab, scant consolation for the family that has seen their inheritance decimated.

Conversely…..Lucky Ted

He’s also got savings totalling £200,000 held as £10,000 in a bank account and £190,000 in an Investment Bond with a life assurance company.

Here, his assessable capital is just £10,000 (below the minimum £14,250), so the Local Authority pays all of his care fees for the rest of his life allowing him to pass all of his capital to his chosen beneficiaries.

So, how can this be?

The guidelines for Local Authorities conducting means tests are covered in a document commonly known as “CRAG” – Charging for Residential Accommodation Guide 2012 – this document states that money held in a Life Assurance policy is a disregarded asset for the purposes of the means test.

The Investment Bond is a strange and wonderful beast – to the investor it looks and feels like a pure investment plan; however due to a little known nuance in its make-up it is actually a Life Assurance policy.

Beware – there are many things out there in the investment world known as a “bond”; however, to benefit from this favourable treatment in the means test – you have to have the right type of bond!

Although beyond the scope of this brief article, you should note that if you are taking regular withdrawals from an Investment Bond, these can be assessed in the means test.

The moral therefore is have the right type of bond – and don’t take withdrawals!

(In the interest of keeping the above examples straightforward, I have assumed the spouses of Alf and Ted continue to live in the main residence and therefore it is also a disregarded asset. I have also assumed for simplicity that their respective incomes are very low and do not affect the means test.)

So, what can you do if you think you’re affected?

1. If you or a relative have been means tested in the past, and Investment Bonds were taken into account in the test…

• This should be brought to the attention of the relevant Local Authority, and it is possible that a refund of incorrectly paid fees can be obtained.

• If you are unsure whether you have the right type of bond, seek professional guidance from a qualified Financial Planner.

2. If you or a relative are about to be means tested…

• Ensure you do not declare the value of any Investment Bonds in your local authority financial assessment or asset declaration.

• If you are unsure about what to declare and what not to declare then seek specialist guidance from a qualified Financial Planner.

3. If you are concerned about the means test in the future…

• Seek specialist advice from a Financial Planner about how to arrange your affairs to minimise the impact of the means test.

• Do this in plenty of time (ideally, many years in advance), as an investment into a Life Assurance Bond the day before you are due to be means tested will be caught under the Deprivation of Assets provisions in the CRAG guidelines. This basically means that the disregard rule is disregarded! Simples……

Other ways in which a qualified Financial Planner might be able to help you:


• Making sure the money doesn’t run out.

• Managing that difficult balancing act – getting a decent investment return whilst also retaining access to pay care fees if you live longer than expected.

• Helping you work out if you can stretch to that opulent 5 Star care-home of choice.

Power of Attorney Cases

• Ensuring the assets are held in a fashion that will assist quick and efficient distribution of funds following death.

• Acting as an attorney is an extremely responsible position; a good Financial Planner can help attorneys by assisting them to act within their permitted duties and therefore reduce the risk of future action by any disgruntled beneficiaries.

Wealthy clients with Inheritance Tax (IHT) concerns

Do not be concerned that you may have left things too late – IHT efficiency can be achieved in just 2 years, rather than the normal 7, with careful planning.”

This article is intended to provide you with general information only and does not attempt to give you advice on any particular investment or to recommend any particular investment to you. If you have any doubt as to whether a particular investment is suitable for you, you should contact contact us.

There is a risk that investment returns may not achieve the desired result. Investments can go down as well as up and you may get back less than you originally invested.