Moving into a care home in Leicester involves many changes, not just to your living conditions, but it can also affect your financial status. Understanding how factors such as your pension will be affected is crucial for managing your finances effectively and determining whether you need to move into a care home or have your needs met while residing at home.
If you receive a private or state pension or a combination of both, you need to know how they will be treated in the care funding assessment to help you plan better for your care going forward.
Types of Pension and Care Funding
You should understand how different pensions will be treated when entering a care home, and a care funding assessment is necessary.
State Pension in Care Funding
Your state pension will form a fundamental part of the financial assessment for care funding. Even though it is counted as income, there are protections in place that exist to ensure both you and your spouse still maintain financial security.
The assessment will ensure you retain a Personal Expenses Allowance. This is money that is specifically put aside for your personal use and will not be used for care fees.
The state pension will continue to be paid normally when you enter care. But how it is used will change. Most of it will go towards your care costs. However, you’re guaranteed to retain your Personal Expense Allowance, which is currently set at £28.25 per week. This ensures you maintain some financial independence while in care.
Some of the other important protections for people receiving state pensions include the following:
- Guaranteed Personal Expense Allowance
- Protection of Spouse’s Pension Rights
- Consideration of disability-related benefits
Private and Occupational Pensions
Private and workplace pensions are more complex in their considerations for care funding assessments. There’s a pension guidance in place that explains how these pensions are treated.
Generally, private and occupational pensions are considered taxable income; however, various factors affect their assessment.
It is important to carefully consider how you draw your pensions when entering care because it can impact your care funding assessment and also your ability to meet the care costs long-term. Regular income from these pensions will be considered in your financial assessment. However, lump sum withdrawals may be treated differently depending on how they are utilised.
If you have an occupational pension, special provisions exist for sharing pensions with spouses. Up to 50% of your occupational pension can be disregarded in the financial assessment if it is being paid to your spouse. It is a crucial protection that helps your spouse maintain their financial independence.
Financial Assessment and Your Pension
The financial assessment, also known as a means test, determines your whole financial situation. Understanding how this process works can help you understand how it will impact your private pension. It is divided into several stages, such as:
Income Assessment Process
The local authority will look at your total income during the financial assessment. This will include all pensions and other sources of income. They will consider regular payments from state, occupational, and private pensions, as well as any other income sources, such as investments or rental income.
There are certain types of benefits, such as disability benefits, that may be fully or partially disregarded in the assessment.
During the assessment, you will be assured of retaining your Personal Expenses Allowance. This is a protected amount that ensures you maintain some financial independence regardless of your care needs or total income.
Protection for Partners
If you have a spouse or civil partner, there are specific rules in place to protect their financial security when you enter care.
These rules are designed to shield your partner from financial hardship after you move into care. Your spouse will retain their own pension rights and income, and arrangements can be made to ensure they receive an appropriate share of any joint income.
The property occupied by your partner will also remain protected, ensuring they can maintain their home and standard of living. Other essential protections for partners include:
- The right to receive up to 50% of the occupational pension
- Protection of the family home while it is occupied by the partner
- Consideration of ongoing household expenses
How You Can Manage a Pension in Care
You need to understand several key aspects of pensions and care funding systems to effectively manage your pension when you go into care. How you arrange your pension payments significantly impacts both your care and funding assessment and your ability to maintain financial independence.
Pension Payment Options
Before entering care, you will need to decide how your pension is paid and managed. Direct payment to the home streamlines the fee payment process and reduces administrative burden. However, it also affects how you manage your Personal Expenses Allowance.
Alternatively, you can have payments made to your personal account, which maintains greater financial control and provides clearer oversight over your finances. But this approach requires more active management.
Split payment arrangements offer the best balance. They enable you to cover care costs while maintaining financial independence and supporting family members. This option is useful when you have to manage other financial commitments alongside the care fees.
Tax Implications and Considerations
You also need to know that moving into care will also impact your pension’s tax treatment. Changes to your living situation will affect your tax position, including personal allowances, making it essential to un