If you are a self-funder, the challenge is how to meet these substantial costs without depleting your entire life’s savings too quickly. There are several strategies to consider.

1. Using Income and Savings The most straightforward approach is to use your existing income (pensions, investments) and draw from your savings. However, with care costs potentially exceeding £50,000 a year, even a substantial savings pot can be eroded surprisingly quickly. This can be a source of great anxiety, worrying whether the money will last.
2. Immediate Needs Annuity (or Care Fees Annuity) This is a specialist insurance policy you buy with a lump sum from your savings. In return, the annuity provider guarantees to pay a regular, tax-free income directly to your registered care provider for the rest of your life.

• Pros: It provides complete peace of mind. You know exactly what it will cost, and the income is guaranteed for life, no matter how long you live. This protects the rest of your capital from being run down.
• Cons: The initial lump sum required can be very large. If you pass away sooner than expected, you won’t get the money back (though some policies offer a degree of capital protection). The decision is irreversible once made.

3. Equity Release: A Detailed Look For many, the family home is their largest but least accessible asset. Equity release allows you to unlock some of the value of your property, tax-free, to pay for care while you continue to live there. The most common form is a Lifetime Mortgage.

How does it work? You take out a loan secured against your home. You receive this as a lump sum or, more flexibly for care funding, in smaller, regular instalments (drawdown). You retain full ownership of your home. The key feature is that no monthly repayments are required. The loan amount, plus the interest that rolls up, is repaid in full when you pass away or move permanently into care, usually from the sale of the property.

The Safeguards: Modern equity release plans are highly regulated by the Financial Conduct Authority (FCA). Reputable providers are members of the Equity Release Council and offer crucial protections:

• No Negative Equity Guarantee: You will never owe more than the value of your home.
• Security of Tenure: You have the right to remain in your home for life.

Why Consider it for Care Funding?

• Staying at Home: It is a powerful tool for funding domiciliary care, allowing you to stay in your familiar, comfortable surroundings for as long as possible.
• No Drain on Savings: It allows you to pay for care without depleting your liquid savings and investments, which can be kept for other needs or for inheritance.
• Flexibility: The drawdown option means you only take money as you need it, and you only accrue interest on the funds you have released.

The Crucial Downsides – This is Not Free Money:

• Impact on Inheritance: This is the most significant drawback. The loan plus compounded interest will be repaid from your estate, which will substantially reduce, or even eliminate, the inheritance you can leave to your children.
• Compound Interest: Because you are not making repayments, the interest rolls up and is added to the loan. This means the amount you owe grows at an accelerating rate over time.
• Effect on Benefits: Taking a large lump sum could impact your entitlement to means-tested state benefits.
• Reduced Future Flexibility: Taking out a lifetime mortgage may limit your ability to move house in the future, although many plans are now portable.

Equity release requires a deep and honest conversation with your family and a specialist adviser. It can be a highly effective solution for the right person in the right circumstances, but it is not a decision to be taken lightly.