If your relative is in a care home, can they lose their savings if it goes bust?

If you have a relative in a care home, can they lose their savings if it goes bust?

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In 2010 there was a story in the paper about a 96-year-old woman who lost over £10,000 in savings when her care home went bust. It seems that the care home hadn’t kept her money separate from their own business accounts. And nothing was – or perhaps could have been – done to stop it. So if your mother, father or other relative is in a care home, what can you do to make sure they’re protected financially?

What the regulations say

According to the Care Quality Commission, which inspects and regulates care homes in England, care homes must keep residents’ money separate from their own.

The rules are quite clear:

  • The Health and Social Care Act 2008. The Health and Social Care Act came into full force on October 1st 2010 and says that users’ money must not be pooled with ordinary business cash. It replaces similar provisions in the previous act covering care homes.

SAVVY TIP: The Care Quality Commission says that under this new act it will check all aspects of the care home, including that it keeps residents’ money separate from its own, at least every two years.

  • It can react to warnings. If a relative suspects that the care home wasn’t abiding by these rules it could get in touch with the Care Quality Commission which could – and should – follow this up.

Care home regulation in Wales, Scotland and Northern Ireland

In Scotland it’s the Care Commission that inspects and regulates care homes, in Wales it’s the Care and Social Services Inspectorate and in Northern Ireland the Regulation and Quality Improvement Authority has responsibility for regulating care homes.

SAVVY TIP: In Scotland care homes are supposed to keep residents’ money separate to their own. Although there are still some care homes that keep it all in one central account. The ‘Regulation of Care Act’ states that money should be logged if it is handed over to the care home etc. If you think a care home isn’t doing this you should complain to the Care Commission.

What happens when the local authority pays for care

When the local authority pays for your care all of your income (minus a small personal allowance) is included in means testing. This means that it wouldn’t be unusual for the care home to ask for your pension to be paid directly to them, which is what seems to have happened in the case that made the newspapers.

However, the personal expenses allowance of around £22 a week should always be kept by the person in the care home (or by their relative who has legal authority to look after their finances).

How to protect yourself

Most people go into care because they or their families can no longer cope. It’s a time of crisis which often means that there are all kinds of pressures to get something sorted out quickly. And care homes don’t have the best reputation when it comes to issuing contracts, confirming financial arrangements and spelling out the rights of people who live there.

Janet Davies of Symponia, which specialises in long term care, has these tips to make sure you — or your relative — doesn’t lose out financially.

  • Check the contract and legal agreement. You wouldn’t move into a rented property without checking the tenancy agreement so you shouldn’t expect your parent to move into a care home without someone finding out what their legal rights and responsibilities are.
  • Set up a lasting power of attorney (LPA). This is a legal agreement which says that if and when someone can no longer make decisions about their finances or welfare, someone they’ve appointed will do so on their behalf.

SAVVY TIP: A lasting power of attorney can only be set up while someone is able to make decisions (when they have ‘mental capacity’). That means you can’t leave it until someone has moderate dementia, for example, if they wouldn’t understand the implications of what they’re being asked to sign. No one wants to think about something grim like not being able to look after their finances or welfare but a lasting power of attorney must be set up before it’s needed.

  • Find out what state benefits or allowances your relative is entitled to. You should know — or find out — how much money is due, when it is paid and where the payments go to.

SAVVY TIP: There’s useful information on care homes and benefits on the Direct.gov website.

  • Check bank statements once a month. Make sure that payments you expect are being made as set out in the DWP and/or care home contract.

Useful links:

You can find a list of companies that specialise in later life and care fees, and who support what we are trying to do at SavvyWoman, on the directory.

Related articles

What you need to think about if you need to pay for long term care

Arranging care at home for an elderly relative

Giving away your home to avoid care fees – can you give away your home to avoid paying for care?

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