Just over a year ago, I wrote here about my family’s effort to sort out our 87-year-old mother’s financial affairs by refurbishing her pretty west country cottage and turning it into a holiday let. We had embarked on this project after realising that a move into residential care meant that her (public sector, final salary) pension income would fall well short of her monthly care home fees.
Fourteen months after the first paying guests visited, it’s so far so good. For the moment, it looks as though our mother’s cottage can comfortably cover its own running costs as well as the present shortfall on her care home fees. Naturally, we’re pleased and very relieved—in a time when “safe” investment options pay such paltry, below-inflation returns, the ability of well-maintained property to generate a steady stream of income has once again proved indispensable.
Around the same time our first guests were arriving, a government-appointed commission led by Andrew Dilnot was finalising its recommendations on how Britain should pay for the care of our growing numbers of elderly people. Dilnot’s report, published in July last year, said that the government should agree to meet everyone’s lifetime care costs above a threshold of between £25,000 and £50,000. Dilnot picked £35,000 as a working assumption and this is the figure most often mentioned in the press. Remember this is for the actual cost of care—he also recommended that people who could afford it should pay £7,000 to £10,000 a year towards their own food and accommodation while in residential care.
Dilnot’s recommendation has been back in the news recently as the Treasury is reportedly unhappy with the idea of underwriting an annual bill estimated at £1.3bn to £2.2bn, depending on where an individual’s contribution is capped. The Treasury’s reluctance is hardly surprising: David Sinclair of the International Longevity Centre says there are about 10,000 centenarians in Britain today, a number projected to reach 500,000 by 2066.
However, by putting a figure on a potential lifetime bill, Dilnot provides a yardstick for those considering how to create income for their own dotage or that of their parents.
Our mother has been in residential care since May 2010, paying about £2,500 a month in fees, or £30,000 a year. Subtracting £10,000 for food and accommodation, as Dilnot does, her annual care costs come to £20,000. If the cap on her lifetime contribution existed and had been…