For many people in the UK, the cost of long-term care can be overwhelming. While savings and income are the most common ways to fund care, there are additional financial options available to self-funders. These include equity release, deferred payment agreements, and immediate needs annuities.
Understanding how these tools work can help families manage care costs more effectively, while protecting assets and ensuring long-term stability.
Equity Release for Care
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Equity release allows homeowners to access the value of their property without having to sell it immediately.
- Provides a lump sum or regular income.
- The money released can be used directly to pay for care.
- The loan is typically repaid when the property is sold, often after the individual moves permanently into a care home or passes away.
This option can be beneficial for those with significant property value but limited cash flow.
Deferred Payment Agreements
A deferred payment agreement (DPA) is an arrangement with your local authority.
- The council pays for care costs upfront.
- Repayment is deferred until the property is sold or after the individual passes away.
- Interest and administration charges may apply, but the arrangement prevents the need for an immediate property sale.
Deferred payments are often suitable for families who wish to keep a property for inheritance or rental purposes during the resident’s lifetime.
Immediate Needs Annuities
An immediate needs annuity (also known as a care fees annuity) is an insurance product designed to cover long-term care costs.
- A lump sum is paid upfront to purchase the annuity.
- In return, the annuity provides a guaranteed income for life, specifically directed towards care costs.
- Payments are tax-free if paid directly to a registered care provider.
This option provides financial certainty and protects against the risk of care costs increasing over time.
Comparing Care Funding Options
The table below summarises the key features:
| Option | How It Works | Main Advantages | Key Considerations |
|---|---|---|---|
| Equity Release | Unlocks value from property without selling immediately. | Access to cash while remaining in the home. | Repayment required later; reduces inheritance. |
| Deferred Payment Agreement | Local authority pays care costs, repaid after property sale. | Delays the need to sell property; flexible timing. | Interest/fees may apply; agreement must be sustainable. |
| Immediate Needs Annuity | Upfront lump sum secures guaranteed lifetime income for care. | Predictable payments; protects against rising costs. | Requires significant lump sum; no refunds if lifespan is short. |
FAQ – Other Ways to Pay for Care
What is equity release for care?
It is a way of unlocking money tied up in your property to fund care costs, usually repaid when the home is sold.
How does a deferred payment agreement work?
The local authority pays care costs upfront and is repaid later, typically from the sale of the property.
What is an immediate needs annuity?
An insurance product purchased with a lump sum that provides a guaranteed income for life to cover care fees.
Do these options affect inheritance?
Yes, all three can reduce the value of assets left to beneficiaries, though they may provide greater financial stability for care costs.
Which option is best for me?
The right choice depends on personal finances, health needs, and long-term goals. Professional financial advice is strongly recommended.
Need help finding a care home?
Senior Home Plus offers free personalized guidance to help you find a care facility that suits your health needs, budget, and preferred location in the UK.
Call us at 0203 608 0055 to get expert assistance today.
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