‘Will I run out of money?’ is one common anxiety for UK senior citizens. This can be a scary prospect for retirees, particularly those who don’t fully understand what the government can offer them in this situation.
If a senior citizen runs out of money, they have a number of options including relying on family support and being supported by the government. It is not in the public interest for elderly residents to be evicted from care homes so this outcome tends to be avoided at all costs by everyone involved.
For elderly citizens living in care or assisted living homes, even if you run out of money and are no longer able to ‘self-fund’ either via your own funds or family members money, the UK government via local councils is likely to help pay the care-home fees, at least to some extent.
What happens to UK senior citizens if they run out of money?
When UK senior citizens run out of money, they are ultimately reliant on family, friends or governmental support assuming they are unable to produce further income for themselves. Many elderly people in the UK qualify for NHS or local authority support.
When a senior citizen realises they are running low on funds, it’s often at the point where it is too late to change financial habits in order to improve the situation.
With this in mind, senior citizens, with the assistance of family and friends if necessary, should look into their financial situation as early as possible and model out how much they will be left with for the remaining years of their lives.
If your current expense level can’t be maintained, it is at this point that changes should be made to allow your money to last longer.
Elderly family members depending on their family for support is something that varies from family to family and depending on individual cultures. In certain cultures, supporting elderly parents is a non-negotiable whilst other families put less emphasis on this.
For elderly citizens who are at risk of running out of money, relying on family and friends is a common port of call and is something that shouldn’t bring any shame.
For those without family or friends, or even those with family and friends who are unable to help, the next step is seeking governmental support which can come in the form of NHS or local authority support following a few standard tests.
What happens to someone in a nursing home who runs out of money?
If you are living in a nursing, care or senior citizens home and run out of money, the local authority will perform a financial means assessment to determine what support they can offer you. Whether the council is able to pay care home fees will depend on the contract signed with the care home facility.
Generally speaking, nobody involved wants to reach a situation where an elderly person is evicted from a nursing or care home. It’s very rare that you see a pensioner living on the streets.
Clearly, the ideal situation is that a senior citizen has a sufficient pension and savings so that they never reach a situation where they run out of money. Similarly, the lucky amongst us will have family who are willing and financially able to assist elderly family members.
However, even if you aren’t in either of these ideal situations, the local authority has a duty to support its elderly citizens and following the completion of both a ‘care needs assessment’ and a ‘financial means test’, the council covers the cost of residential care up to a specific level.
If the elderly citizen wants to upgrade from the basic accommodation options funded by the local council, ‘top-up payments’ can be made by family members to upgrade their relative to a larger room or a room with superior facilities.
Who pays for a care home when the money runs out?
When a UK senior citizen’s money runs out, the local council authority will tend to cover residential costs following a ‘financial means test’ or the NHS will fund certain eligible elderly citizens accommodation and healthcare following a ‘care needs assessment’.
The first step for elderly citizens if they are running low on money is to request a ‘care needs assessment’ which will determine what support you are able to get from the local council or via the NHS.
For more on ‘care needs assessment’ – please refer to this NHS page.
Depending on the result of the ‘care needs assessment’, the local council will then arrange for a ‘financial means test’ to be performed which will assess your level of income and financial assets to determine what you are eligible to receive going forward.
The results of this financial means test may result in a number of outcomes including your care home or nursing home costs being paid for in full or being partly paid with the remainder coming from your own assets or money provided by your family.
Senior citizen’s who also have serious medical needs like a disability are likely to be eligible for NHS care which covers all associated living and nursing costs of the individual.
What is a ‘financial means test’ for UK senior citizens?
A financial means test in the UK is a test designed to assess whether the council will contribute towards the cost of your ongoing care with those with very low savings typically eligible. The test involves a representative visiting you and collating information on your savings, pensions and assets.
The financial means test will occur after a ‘care needs assessment’ and will not cost you anything to book.
Your home will only be included in your financial assessment if you and your partner are no longer living in it. If you’re still living in your home and need assistance with carers visiting the property, the value of your home will not be considered in your financial means test.
Assuming you qualify for council assistance on your ongoing care home costs, you’ll be offered a personal budget, typically in the form of a monthly payment to your bank account.
Is your next of kin responsible for your nursing home fees?
Senior citizens next of kin or wider family members are not legally responsible for their elderly family members care or nursing costs. Depending on your culture and values, you may be morally obliged to assist with your elderly family members caring costs but it’s not a legal obligation.
Relatives may voluntarily pay top-up care home costs beyond that provided by the local council. Following a ‘care needs assessment’ and a ‘financial means test’, the council will provide a personal budget to pay for all or part of the ongoing care costs.
Family members may choose to top this up to improve the standard of care and accommodation for their elderly relatives.
Generally speaking, family members have no legal obligation to assist with care home costs. The only exceptions to this are those cases where the senior citizen and family member have joint assets which will make up part of the financial means test.
How long should a pension last?
How long your pension lasts will depend on the amount you have been able to invest during your career and how long you live between retirement and death. The initial goal should be to ensure your pension can cover your essential living expenses for life but this isn’t always easy to forecast.
Clearly, the ideal scenario is your pension lasts precisely as long as you live, meaning you don’t run out of money nor do you die with plenty left over. In reality, this is almost impossible to achieve.
For this reason, most people aim to retire with a pension that is more than enough to last them through the remainder of their life. This usually results in some inheritance being left to family members which are typically taxed pretty heavily.
If you’re not sure how long your pension will last you after retirement, the first thing to do is to work out how much you and your household spend per year and consider whether this rate will remain fairly consistent year on year.
There are numerous helpful pension calculators online which can help retirees work out precisely how long their accumulated pension pot is expected to last.
How to prevent your pension from running out?
There are a number of strategies out there for ensuring your pension doesn’t run out. The most important aspect is to plan and model your pension savings over time. It’s important to work out your life expectancy using an online calculator and your likely income needs.
It’s also worth noting that products like annuities are available which allows retirees to be paid a set amount for life based on what value of annuity they purchase. For more on annuities, check out this post.
Am I legally responsible for my elderly parents in the UK?
The children or family members of the elderly are not legally responsible for their elderly parent’s financial situation. Whilst a moral or familial obligation may be in place to help your elderly parents, this is not legally binding and you will never be legally on the hook for care fees or similar.
As always, please remember I am an Accountant, but not your Accountant. In this post (and all of my others) I share information and oftentimes give anecdotes about what has worked well for me. However, I do not know your personal financial situation and so do not offer individual financial advice. If you are unsure of a particular financial subject, please hire a qualified financial advisor to guide you.
This article has been written by Luke Girling, ACA – a qualified Accountant and personal finance enthusiast in the UK. Please visit my ‘About‘ page for more information. To verify my ACA credentials – please search for my name at the ICAEW member finder. Please comment below or contact me here to get in touch with questions or ideas for future posts.