Long-term care

How to look after and care for Britain's elderly population is a problem that successive governments have wrestled with unsuccessfully. With more than 11 million pensioners, increasing longevity and nearly 3 million Britons aged over 80, it's an issue that is here to stay.

Types of care

Long term care generally means going into a home. But care in old age can also be provided by your family or through assistance in your home from a care professional. Local authorities and charities may provide a certain level of help such as meals-on-wheels, home visits from carers to help with washing and dressing or a place at a day centre.

With cut backs in council budgets, you are likely to have to pay for home help unless you are on benefits or pension credits. You may have to hire a private carer unless you qualify for a community nurse whose services should be free on the NHS.

Another alternative is to move to sheltered housing where there is a resident warden and even some health services on hand in an emergency.

Care homes

There are different types of care homes – residential homes for those who don't have health problems and nursing homes for those who need more medical care.  Elderly people with dementia usually go into nursing homes designed for those with mental illness where there should be a level of expertise in dealing with their difficulties.

Don't expect social services to pick up the tab for a place in a care home. It's not until your savings fall to around £23,000 (the exact amount differs depending on which UK country you live in) that you will get help with the fees. These are astronomical. Residential care home fees are above £25,000 a year on average while nursing home fees are typically nearer to £40,000 a year.

However, if you are so ill that your main need is for health care, all your fees should be paid by the NHS. This is a highly controversial area with families spending years battling the health authorities to get them to pay for care fees and not all are successful.

Will you have to sell your home to pay for your fees?

Unless you can qualify for all your care being paid for by the NHS, it's not just your savings and income from pensions and other investments that are taken into account when assessing if you can afford to pay for your care. Social services will include the value of your home too.

The exceptions are:

• Your stay in the care home is only temporary
• Your home is still lived in by your husband or wife or a partner
• Your home is still lived in by a relative who is aged 60 or more or someone who is incapacitated.

Many elderly people look to try to save their home from being taken into account by giving it away to their children before they need to go into care. This is fraught with difficulties and can be discounted by social services if they deem it was done purely to avoid paying care fees so you'll be no better off.

It is likely you will have to sell your home in order to pay the care home fees. If it takes a while to sell, the local authority might agree to pay the fees for you while it's on the market but, take a 'charge' over the home so that it can recoup the money once the property is sold.

Choosing a care home

Social services will give you or your family a list of care homes in your area. It's important to check whether the fees are far more expensive than the amount social services is prepared to pay because when your money runs out, the local authority may insist you move to a cheaper home which it is prepared to fund or the family will be asked to pay the difference between what the council is prepared to pay and the fees. This is known as third-party top-ups which can be financially crippling for families.

There is a major issue here as cash-strapped councils are putting limits on how much they pay for care home fees - elderly campaigners have complained these limits are set unrealistically low. Also in practical and emotional terms, it can be distressing to move an elderly person later in life to a new home.

Paying for care home fees

One option is to use a lump sum – either from savings or the sale of the elderly person's home – to buy an immediate needs care annuity. This will pay a monthly amount directly to the home to help towards the fees. A financial adviser specialising in care plans will help you assess how much you need once income from your pension and other investments are taken into account. The adviser should also compare all the options available to make sure you get the best value for your lump sum.

Do take inflation into account as care home fees typically rise every year at a far faster rate than general inflation.

Apart from your pension income and other savings, you may well receive help from the State towards your nursing care.