The average residential care home in the UK costs nearly £66,500 a year. That is more than most people earn in a full year of work, and yet 60% of over-45s believe annual care home fees would be less than £60,000. For someone who has not planned, that gap can mean selling a home or draining a lifetime of savings far faster than expected.
Disclosure: Some links on this page are affiliate links. If you make a purchase through them, Britwealth may earn a commission at no extra cost to you. We only include products and services that are relevant to the topic.
This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
Four in five people aged over 65 will require some level of care before they die. That is not a small minority — it is the majority. Yet only 7% of over-75s have set aside money specifically to cover it. Most people assume the state will step in, or that their pension will stretch further than it actually will. Among those who have already helped a loved one find care, 85% were shocked by the cost. The gap between expectation and reality is not a small miscalculation — it runs into tens of thousands of pounds per year.
This matters differently depending on where you live in the UK. The rules for who pays what vary significantly between England, Scotland, Wales and Northern Ireland. A person with £30,000 in savings would be expected to cover their own care in full in England, but would receive some state support in Wales. That kind of difference changes the whole shape of a retirement plan. Here is what you actually need to know.
Most people have never heard of self-funded care until they are staring at a bill. It simply means paying for your own care home costs because your assets sit above the threshold where the local authority contributes. The moment you cross that line — £23,250 in England — you are expected to cover the full cost yourself, including accommodation, nursing and personal care. And those costs are rising faster than most pensions.
What I tend to notice is that people plan carefully for their retirement income but leave the biggest potential expense unexamined. A care plan does not need to be complicated, but it does need to be based on real numbers rather than guesses. The health and wellbeing side of retirement often gets more attention than the funding side, but both matter equally.
The single most important figure for anyone in England or Northern Ireland is £23,250. That is the asset threshold above which you are expected to pay your own residential care costs in full. Below that line, the local authority contributes, but your home may still be counted as an asset depending on whether a spouse or relative lives there. Between £14,250 and £23,250, you contribute some of your income toward fees, but the council covers the rest.
Scotland and Wales operate different systems. In Scotland, personal and nursing care is free for everyone, but accommodation costs in a care home apply if your assets exceed £35,000. In Wales, the threshold is higher still at £50,000 — below that, local councils contribute toward fees. The table below shows how the rules compare.
→ Scroll right to see all columns
| Nation | Asset threshold for self-funding | What the state covers |
|---|---|---|
| England & Northern Ireland | £23,250 | Nothing above threshold; partial support between £14,250–£23,250 |
| Scotland | £35,000 | Personal and nursing care free; accommodation costs apply above threshold |
| Wales | £50,000 | Council contributes toward fees below threshold |
Among people currently paying for their own care, the top three funding sources are savings or investments (59%), pension income (48%), and proceeds from selling property (36%). Notice that only about half use pension income. The rest are drawing down capital that was meant to last a whole retirement. A person who enters a care home at 80 with a £150,000 pension pot and faces £66,500 a year in fees will exhaust that pot in just over two years. After that, the local authority steps in, but only after the money is gone. That is a hard way to discover the limits of the system.
If you are still in your 50s or 60s and want to stress-test your numbers against these thresholds, it can help to run the figures with a financial adviser who understands care funding before the need arises.
The most common care cost planning mistakes
Underestimating the annual cost by thousands
More than a quarter of over-45s underestimate the true cost of care by more than half. That is not a small rounding error. If someone expects to pay £30,000 a year and the actual bill is £66,500, the shortfall is £36,500 annually. Over a three-year stay, that is nearly £110,000 of unplanned spending. The gap comes from assuming care home fees are closer to basic living costs, when in reality they cover accommodation, nursing, personal care, meals and utilities. The best fix is to look up actual fees in your area rather than guessing.
Not knowing the asset threshold in your nation
A person with £40,000 in savings living in England would pay their own care costs in full. The same person in Wales would receive council support. That is a difference of tens of thousands of pounds based purely on postcode. Many people assume the rules are the same across the UK, but they are not. The threshold in Scotland sits at £35,000, and in Wales at £50,000. Checking which rules apply to you is a five-minute task that can change your entire retirement plan.
Assuming the state will cover most of the cost
Two-thirds of people surveyed were surprised by how little financial support the state provides. The common assumption is that the NHS or local council will pick up the bill for long-term care, but that is only true for people with very few assets. For anyone who owns a home or has built up a pension pot, the expectation is that you fund your own care until your assets drop below the threshold. That can take years and cost hundreds of thousands of pounds.
Leaving it too late to plan
Only 7% of over-75s have made specific provision to cover care costs. Most people wait until a crisis — a fall, a stroke, a dementia diagnosis — and then try to figure out funding under pressure. Among those who have been through the process, 73% found it very stressful. A care plan drawn up in your 60s, when you are still healthy, gives you time to adjust your savings, consider insurance options, and understand the rules without a deadline looming.
- Check the care home fee threshold for your nation (England £23,250, Scotland £35,000, Wales £50,000)
- Look up actual care home fees in your local area — not national averages
- Run a projection of how many years your pension pot would last at those fees
- Review whether your home would be counted as an asset if you needed care
- Discuss care funding options with a financial adviser while you are still healthy
Building a care plan that matches reality
Know what you are funding and where the money will come from
The first step is understanding the full cost of care in your area, not the national average. Residential fees vary significantly by region, and the type of care you need — residential, nursing, dementia specialist — changes the price. Once you have a realistic figure, map it against your expected retirement income and savings. Among people currently funding their own care, 59% use savings or investments, 48% use pension income, and 36% sell property. Most use a combination. The goal is to know, before you need care, which sources you would draw on and in what order.
Understand how your home fits into the picture
For homeowners, the property is often the largest single asset. In England and Northern Ireland, the value of your home is counted as an asset for care funding purposes unless a spouse, partner, or certain relatives still live there. That means you could be forced to sell to pay for care. There are ways to protect the home — deferred payment agreements with the local authority allow you to delay selling until after your death — but these need to be arranged in advance. Understanding the estate planning implications of care costs early gives you more options.
Consider how pension access rules interact with care funding
Once you start drawing a defined contribution pension, the Money Purchase Annual Allowance (MPAA) kicks in and limits future contributions to £10,000 a year. That matters if you plan to keep working part-time while also drawing pension income to cover care costs. The interaction between pension access, tax, and care funding is one of the most overlooked areas in retirement planning. A health insurance specialist who understands long-term care can help clarify what your pension and savings would actually cover.
Plan for the possibility that care needs change over time
Four in five people over 65 will need some care, but the type and duration vary enormously. Some need residential care for a few months at the end of life; others need dementia nursing care for a decade. The average stay in a care home is around two to three years, but that average hides a wide range. Building flexibility into your plan — keeping some savings liquid, maintaining a small buffer of accessible pension income — means you are not forced into a rushed decision if care needs escalate.
Frequently asked questions about care costs
What happens if my assets are just above the £23,250 threshold? ▾
Can I give away my home or savings to avoid paying for care? ▾
Does the State Pension count as income for care funding? ▾
What is a deferred payment agreement? ▾
Are care home fees tax deductible? ▾
Does the NHS ever pay for care home fees? ▾
The real cost of not planning for care
The numbers in this article are not hypothetical. Four in five people over 65 will need care, and most will underestimate what it costs by a significant margin. The difference between guessing and knowing is not a small amount — it is the difference between a pension pot that lasts and one that runs out years early. The asset thresholds, the variation between nations, and the limited state support are all knowable in advance. The only question is whether you look them up now or discover them under pressure later.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Pension Pot Perfection: Maximising Your Retirement Income in the UK.
Sources and Further Reading
Health and Wellbeing in Retirement: Staying Active and Engaged — Practical guidance on maintaining health in later life, which directly affects the type and cost of care you may need.
Beyond the Pension: Exploring Alternative Retirement Incomes — Looks at other income streams that could help cover care costs without draining your pension pot.
Just Group (2025). Care report 2025. 🔗
Medical & General Financial Solutions Ltd. 6 in 10 over-45s are underestimating the cost of care by thousands of pounds. 🔗
