What are your options for funding long-term care in the UK?
What are your options for funding long-term care in the UK?
Long-term care can be paid for in several ways: local authority support where a financial assessment allows it, income and savings, pensions and investments, the value of a property, or an immediate needs annuity that pays a guaranteed amount towards care fees for life. That is true at home or in a care home, and most families end up using a combination of these. The difficulty is the scale of the cost, which can be punishing: fees often run on for years, deplete a lifetime of savings at a startling rate, and arrive at the point in life when people are least able to absorb them.
Planning for care is still the neglected end of financial planning. Most of the work is about building up: saving for retirement, paying down the mortgage, investing for the years ahead. A complete plan also has to deal with what happens if we can no longer support ourselves physically, and that question is not reserved for old age.
In a hurry?
Most people pay at least part of the cost of their own long-term care. A means test decides what the local authority contributes, and the rest can come from income, savings, pensions, property or a specialist care annuity. That is true at home or in a care home. This article explains how the means test works and where each funding route fits, including immediate needs annuities, equity release, and drawing on pensions and investments.
Speak to a specialist adviser →Illness or injury can create a need for care at any stage of life. Where an accident is someone else's fault, a compensation payout may fund the care that follows. Many conditions simply develop, though, with no one to blame and no payout attached, and the cost then falls on the same savings, pensions and property.
It is also a problem politics has repeatedly declined to solve. Successive governments have reviewed care funding, debated it and promised reform, and for decades the difficult decisions have been kicked down the road. The system needs updating sooner rather than later, but no family can plan on reform that has not yet happened, so this article deals with the system as it stands.
The starting point is the means test. Local authority help with care costs is means-tested, so the value of savings, investments and sometimes the family home determines whether the council contributes anything at all. Many people who move into a care home will pay some or all of the cost themselves, at least to begin with, and the decisions about where that money comes from often have to be made quickly and under strain.
This article covers how the means test works and the main ways care can be paid for, whether care is needed now or you are planning ahead:
How does local authority means-testing for care work?
Local authority support is decided through a financial assessment. When someone needs care, at home or in a care home, the council looks at their income and capital to decide who pays for what. Above a set level of assets, a person is expected to meet the full cost themselves; below it, the council begins to contribute, with income still taken into account. The thresholds change over time, but the principle is constant: the more someone has, the more they are expected to pay.
Whether the family home counts depends on the situation. The home is generally left out of the assessment while a spouse, partner or certain other dependants still live there, and it is not counted at all where care is provided in the person's own home. Even where the home does count, it does not necessarily have to be sold straight away: councils operate deferred payment schemes that allow fees to be secured against the property and settled later.
Not all care is means-tested, either. Where someone's needs are primarily health-related rather than personal or social, NHS funding can cover the full cost of care regardless of wealth. Eligibility is assessed and far from automatic, but it should be ruled out before a family assumes the means test applies.
Thinking ahead about care costs, or facing them now?
Care fees planning covers both: structuring money calmly in advance, and choosing the right funding route when care is already needed. Our advisers work with families across the UK in both situations.
Care fees planning advice →What is an immediate needs care annuity?
An immediate needs annuity, sometimes called an immediate care plan, is an insurance policy bought with a single lump sum when care is already needed. In return, it pays a guaranteed regular amount towards care fees for the rest of the person's life, however long that turns out to be. Plans can cover care at home as well as residential care.
Each plan is individually priced. The insurer takes account of age and health, so the cost reflects individual circumstances rather than a standard rate. When the payments go directly to a registered care provider, they are usually free of income tax, which makes the guaranteed amount go further than the same income drawn from taxable sources.
The appeal is certainty. Care fees are open-ended, and an annuity converts an unpredictable liability into a known cost, protecting whatever remains for a spouse or the wider family. The trade-off is the upfront outlay, which is substantial and, in most cases, spent whether care is needed for two years or twenty. Some plans offer capital protection options that return part of the purchase price on an early death.
What is pre-funded care insurance?
Pre-funded care insurance was a policy taken out in advance, before care was needed, to pay out if it ever became necessary. The market for these plans has largely disappeared: UK insurers withdrew from selling new policies some years ago, and anyone searching for this cover today will find little or nothing available to buy.
Existing policies are a different matter. If you or a relative took out a pre-funded plan in the past, it may still be valid and valuable, and its terms should be checked carefully before any other funding decisions are made.
For everyone else, planning ahead for care is no longer a product you buy. It is a planning exercise: building up and earmarking savings, investments and pension provision so that, if care is ever needed, the money is there and sensibly structured. It is far easier done early than at the point of need.
Can equity release be used to pay for care?
Equity release can help pay for care in some circumstances, although it suits some situations much better than others. It allows homeowners to draw on the value of their property while continuing to live in it, most commonly through a lifetime mortgage. That makes it a possible source of funding for care received at home, for adapting a property, or for topping up fees where one partner needs residential care and the other remains in the house.
It is rarely the answer for a single homeowner moving permanently into a care home. A lifetime mortgage is normally repaid when the borrower dies or moves into long-term care, so the situation it would be funding is also the one that brings it to an end. In those circumstances, selling the property or using a council deferred payment scheme tends to make more sense.
Equity release also has consequences that need weighing before anything is signed. Interest builds up over time, the value left in the estate reduces, and releasing capital can affect entitlement to means-tested support. It is a regulated product for good reason, and advice is required before going ahead.
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Join our readers →Can pensions and investments fund care costs?
For most people who fund their own care, pensions and investments are the natural starting point. Pension income continues in care, and drawdown arrangements can usually be adjusted to meet fees. Savings and investment portfolios can be drawn on directly, and for shorter stays or care at home, that may be all that is ever needed.
How the money is taken matters as much as where it comes from. Large withdrawals from a pension in a single year can create an unnecessary tax charge, and selling investments without regard to gains, income and timing can do the same. Drawing on different accounts in a deliberate order, and keeping the remainder invested appropriately while fees are paid, can make a real difference to how long the money lasts.
There is also the question of what the plan needs to protect. Fees may have to be paid for an unknown number of years, a spouse or partner may depend on the same assets, and there may be firm intentions about what should pass to the family. AV Trinity's Chartered Financial Advisers help families weigh these pressures together rather than one at a time, and as a firm authorised and regulated by the Financial Conduct Authority, we are accountable for the advice we give.
How much could care cost you?
The calculator below shows the scale involved: what different levels of care cost, and what funding them would take. It is an illustration, not advice.
Care cost calculator
See the scale of care costs in the UK: what different types and levels of care cost, and what funding them would take. Every figure is an illustration you can change.
Pre-filled from published UK averages at the time of writing. Costs vary widely by area and provider, so replace this with a real quote if you have one.
Show the numbersThis calculator is a general illustration of the scale of care costs, not advice, a forecast or a quote. Default costs are based on published UK averages at the time of writing (figures last reviewed August 2026) and real costs vary widely by area, provider and individual needs. The premium end of the market runs higher than any average: some homes charge more than £2,500 a week. The means test figures quoted are England's; Scotland provides free personal and nursing care with different capital limits, and Wales applies its own limit and home care charge cap. The illustrations ignore tax, benefits (such as Attendance Allowance), NHS Continuing Healthcare, NHS-funded nursing care, local authority contributions and investment growth, all of which can change the picture. Whether a home counts as capital depends on who lives in it and where care is received. Thresholds, prices and rules change over time. Please take advice before making decisions. Sources: carehome.co.uk: care home fees | Homecare Association: minimum price for homecare | homecare.co.uk: home care and live-in costs | gov.uk: social care charging circular
What's next?
There is rarely one right way to pay for care. The sensible route depends on the type and likely length of care, the assets and income available, and what the family wants to protect. Setting those factors out clearly, and testing each option against them, is where a conversation becomes more useful than an article.
Our Chartered Financial Advisers offer a free initial consultation to anyone who wants to work through how care fees could be funded in their own family's circumstances.
We work with clients across the UK. Locally, we advise clients throughout Kent and East Sussex, including Tunbridge Wells, Sevenoaks, Maidstone, Tonbridge, Crowborough and Eastbourne.
This article is for general information only and does not constitute personal financial advice or a recommendation. The suitability of any investment approach depends on individual circumstances, objectives and the current regulatory environment. Tax treatment and investment rules can change over time, and their effect will depend on personal circumstances. Investments can go down as well as up, and you may get back less than you invest.
