Retirement hope doesn't need to be flight of fancy

AN ANIMATED tale of an 80-year-old man's retirement may not at first glance seem a likely blockbuster. However, the latest offering from Pixar, the studio behind Toy Story and Monsters Inc, picked up an Oscar.

Up tells the story of elderly couple Carl, a balloon seller, and his wife Ellie. Unable to have children, they spend their life saving for their dream one-way trip to "Paradise Falls" in South America. Just as they are about to make it, Ellie falls ill and dies, leaving Carl a lonely widower.

Carl dreads the thought of moving to the Shady Oaks retirement home. When the day finally comes, he spectacularly turns his house into a makeshift airship using thousands of coloured helium balloons and escapes with his old house, upwards, setting sail for South America.

The animated adventure is a heart-warming antidote to the reality for many pensioners facing the loss of their independence and the need for professional care. Government statistics show that as many as one in four of us will require nursing and/or personal care in our old age. Those unable to continue living in their own home face an average care home fee of around 25,000 per year.

The economic puzzle of how to pay care costs for the ageing UK population is likely to be one of the main issues during the current general election campaign, albeit more so south of the border, where there is said to be a less benign attitude towards targeting elderly people's assets than here in Scotland.

However, contrary to popular thinking, the requirement to sell one's home – in any part of the UK – to pay for care is far from new. The National Assistance Act 1948 is still the ruling statute and contains the basis for local councils carrying out a financial assessment in every case to decide on your ability to meet or contribute to residential care costs.

While certain types of income are ignored, most is taken into account in deciding the extent of an individual's contribution. Social services also investigate how much capital the individual has, including savings, investments and property. Those with more than the upper limit (currently 22,500) will be expected to use it to help meet residential care home costs. Those with few savings or other moveable assets are likely to find their homes targeted by the authorities.

After moving into a care home, a person has only 12 weeks to decide whether to sell his or her home or not. After that, the capital value of the house is deemed to be available to meet care home fees, and used towards the nursing home fees. Special rules apply to couples if one partner enters a care home and the other stays in the marital home. In that case, at least, the property is not taken into account as part of the financial assessment while one spouse remains at home.

Liability for fees over a number of years erodes assets and reduces the value of any inheritance that an elderly person might have been expected to pass to the next generation of the family. Many people seek legal advice on ways of reducing liability to contribute to care costs. Unsurprisingly the rules pick up on any disposal of assets made in contemplation of the financial assessment by the local council – so anyone making gifts or transferring property simply to reduce the level of capital for assessment purposes will be caught out.

On the other hand, there are some financial planning measures that can be considered. The Department of Health recently issued a consultation document which addresses the possibility of certain life assurance-based investment bonds not being counted when it comes to means testing for residential accommodation fees. Trusts can also be set up and used to provide for your children and grandchildren, provided it's not all left to the last minute.

Flying up in his helium balloon-powered house, Carl has the last laugh and escapes the clutches of the Shady Oaks Nursing Home. For the rest of us, the trick is to find a financial ground rope to prevent your property floating away.

Peter Shand is an associate with Murray Beith Murray WS

Five facts about care in Scotland

1. Everyone is entitled to a contribution of 153 per week towards personal care (if over 65) and 69 a week towards nursing care (at any age). The rest of the costs (accommodation and/or care) are means tested.

2 The value of a main home is not taken into account for means testing if a close relative (or someone who used to provide care for you, having given up their own home) still lives there.

3 If you have savings of less than 13,750 and want to postpone the sale of your property, you can ask for long-term loan from the council. Interest on the loan is payable at the end of the loan based on an index-linked rate.

4 Means testing takes into account your pension, except that 50 per cent may be disregarded if it's used to support your spouse at home.

5 Even if the council is paying some of the costs, you still have the right to choose your care home. If you want to move somewhere more expensive, you may be asked to top up the difference.