Unsure how you’ll fund later-life care? You’re not alone

If you’re wondering how you’ll fund your care later in life, you’re not alone. Research by LV= found that 67% of UK adults are worried about care costs, while 63% are concerned they’ll run out of money altogether.

Care home fees have risen by nearly a quarter since 2021/22, as Which? reports. What’s more, it seems likely that the cost of later-life care will continue to rise in the years ahead.

Ensuring you have enough funds set aside to pay for later-life care can require careful consideration in your retirement planning. By understanding the costs you might face, and creating a plan to set sufficient funds aside, you may be able to fund your care without sacrificing your quality of life in retirement or the assets you hope to pass on to the next generation.

Read on to discover how much you could need to save, what support might be available, and how retirement planning can help protect your assets.

Your fees will depend on multiple variables, including your location and the type of care you need.

As of the 2025/26 tax year, there is no cap on care home fees. Plans to cap the total cost of an individual’s care at £86,000 from October 2025 were scrapped by the government in July 2024.

What’s more, it seems no alternative measures are imminent. A government commission isn’t set to provide recommendations for a National Care Service until 2028, while any consequent changes could likely take several years to be introduced.

As a result, care costs are expected to continue rising in the years ahead, with the amount you pay depending on the type of care you require. The table below shows the average fees for different types of care across the UK.

Source: Carehome.co.uk

However, these fees can vary significantly by location, with care homes in London generally charging £233.25 a week more than the national average, and those in the north-east charging around £230.25 a week less.

According to Which?, care in your own home can cost around £800 a week. However, this option may not always be available, depending on your needs and other variables.

With such variation in costs, ensuring you have enough money set aside can be complex.

Your income and capital are means-tested to determine your funding eligibility

Depending on your income and capital, you may be able to get support from the government to fund your care. According to Carehome.co.uk, around half of care home residents over age 65 are state-funded, while the other half are self-funded.

In England, your funding eligibility is determined by your income and capital, which is means-tested against a Lower Capital Limit (LCL) and an Upper Capital Limit (UCL).

• State-funded: Below the LCL of £14,250
• Partially funded: Between £14,250 and the UCL of £23,250
• Self-funded: Above £23,250

Any savings, investments, and property will generally be included in your capital for means testing. If these assets are owned jointly with your partner, in some circumstances only a portion will count towards your personal capital.

You may not necessarily need to sell your home

According to HM Land Registry, as of July 2025 the average UK house value is £269,735. Since property is generally included in the means test, if you own your home, the chances are you’ll need to self-fund your care.

In some cases, you may have to sell your home to pay for your care – particularly if your other income and capital isn’t sufficient to cover your fees. However, you may be able to avoid selling up if:

• You choose to rent out your property
• You receive care in your own home, or plan to return home after a temporary stay in a residential care home
• Your partner still lives there and the property is jointly owned
• A relative over 60, a child who is either under age 18 or incapacitated, or a divorced or separated partner still lives there

Additionally, you may be able to delay the sale of your home, while still funding your care, by getting a Deferred Payment Agreement (DPA). A DPA allows you to defer repayment of care costs until after the sale of your home, typically after you’ve passed away, with additional interest and administration fees applied.

You might be considering gifting your home to your children to avoid having to sell up. However, this could be seen as a deliberate deprivation of assets, which may result in the property’s value still being included in your means test.

If you’ve already given the property away, and the new owner either refuses to sell it or help fund your care, or loses the home to bankruptcy or in a divorce, you could be unable to fund the care you want.

Self-funders may still be eligible for benefits and funding support.

If you self-fund your care, you can continue claiming your State Pension, while still drawing from your private pension.

In addition, as of 2025/26, in England you may be able to claim:

• Attendance Allowance: Either £72.65 or £108.55 a week, depending on your needs
• NHS Continuing Healthcare (CHC): This may fund some or all of your care and accommodation, depending on your needs
• Funded Nursing Care (FNC): A flat NHS contribution, paid directly to your care home, of either £254.06 or £349.50 a week, depending on your needs
• Personal expenses allowance: £30.65 a week

These benefits generally are not means-tested, with eligibility depending solely on your care needs. The support available to you may vary in Wales, Scotland, and Northern Ireland.

It’s never too soon to start saving for your later-life care.

It’s important to start planning for how you might fund your future healthcare needs sooner rather than later. If you wait until you have already retired to start thinking about care costs, your options for setting enough funds aside could be limited.

As a result, it’s often worth including potential care costs in your retirement plan to help ensure you have enough to fund both your dream lifestyle in early retirement, and your care for later in life.

However, knowing how much to set aside can be difficult, with your fees and eligibility for funding support depending on your needs and wealth at the time.

Additionally, the fees and funding rates could look very different by the time you’re in need of later-life care. Not only could some rates rise over time, but the government could introduce new schemes that either boost or diminish the financial support available.

By creating a retirement plan tailored to your goals and circumstances, you can help ensure you set enough aside to fund your care needs later in life – without needing to sacrifice assets that are important to you. A financial planner can help you assess how much you may need to save, as well as determine tax-efficient ways to grow your retirement funds.

Get in touch

If you’re thinking about retirement planning and would like some guidance to help ensure you’re setting enough aside for your future needs, email info@doddwealthcare.co.uk or call 01228 530913 / 01768 864466 to learn more about how we can help.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate estate planning.

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