Executive Summary

The UK elderly care home market is estimated to be £14bn. Supply in the market is remarkably diverse, ranging from single owner/owner operators and small groups through to large ‘brand’ corporate companies. In terms of diversity of supply, the market is comparable to the retail industry.

Traditionally, investing in the elderly care home market has been seen as a low risk, recession proof, asset backed option. Many quality providers of elderly care homes have proven this to be the case through recent difficult times, weathering the storm of reducing public expenditure and generally poor economic circumstances and as a result are looking to expand their businesses.

Historically, single owner/owner operators and small group businesses use traditional SME lenders, for example banks, to support new home development or expansion to existing business. Corporate groups have sourced a mix of bank funding and private equity to grow their business.

Currently, smaller care home operators report that they find it difficult to borrow from banks, in common with many other small to medium sized businesses, and this impairs their ability to expand their work looking after some of the most vulnerable people in society. Following on from some of the debt-related problems suffered by the larger corporate care home providers, for example Southern Cross, sentiment is turning against private equity involvement in the market.

Meanwhile, in some sectors of the adult care market, demand is growing for particular services. Overall, demand for elderly care is expected to increase over the next ten years with the number of people in the UK aged 85+ forecast to double to 2.9 million by 2031. Whilst alternative service models to residential care aimed at keeping older people in their own homes are promoted heavily by Government, the demand for some types of residential care is assured by the strength of the overall demand. Care home operators in particular sectors of the market offering high quality services with good management controls in place and with growth strategies based on a sound understanding of future demand, are well placed to continue to prosper and benefit from the strong underlying dynamics of the market.
 
iCarehome’s Alternative Development Funding Proposition

iCarehome has expert knowledge of the care home market and has identified opportunities to support £100m of quality new care home development.

Around £100 billion is now held by individuals in Self-Invested Personal Pensions (SIPPs) and the market is growing rapidly. SIPPs allow the individual pension holder to have greater control over how their pension pot is used. The unique iCarehome proposition offers people who hold SIPPs the opportunity to earn a good rate of return in the elderly care home market and affords care home operators access to an alternative money supply to traditional bank funding for new development.

Our proposition is aimed at individuals who either already have a SIPP or who are willing to convert some or all of their pension investment to a SIPP. In brief, working with partners, iCarehome can provide a comprehensive service that offers the opportunity for SIPP holders to earn 10% per annum over a 3 to 5 year term by granting secured loans to carefully selected care home operators. Not only does this deliver a return that is notably higher than stockmarket growth, which has averaged around 3% to 5% in recent years, loan funding is much less volatile than stockmarket investment.

In addition to this excellent rate of return, depending on the size of loan made, participants may also receive added value opportunities, including playing a more active role in the care home business and future resident benefits. For those that have already chosen to take a more active involvement in their pension arrangements, this opportunity is seen to be attractive. But it’s not restricted only to SIPPs: lending of both savings and investments is also permitted.

iCarehome is actively looking for partners in the social enterprise and third sectors to help promote this unique financial and socially worthwhile opportunity to people who manage their own pensions through SIPPs and would welcome enquiries from interested parties.

For Further Information Contact Mike Clinton

Phone: 07818 451836
Email: Use our online form

1. Most care homes charge private residents more than their local council customers

Local councils always negotiate a price with care homes for the residents that they financially support. Care homes claim that councils don’t pay an economic fee, so they have to charge private residents more to make their business work at a profit. Councils say that they are good negotiators and that care homes still make good profits based on the fees they charge to councils. Either way, on average, care homes charge £100 per week more for private residents for exactly the same service. Sometimes they charge up to 50% more. If councils can negotiate a better price, it’s only fair that you should be able to do the same.

2. Most private residents are price-takers

Many people who move into care homes do so at a time of great stress, often following a period of illness. They don’t think to scrutinise the price charged by their care home until it’s too late. Consequently, people eventually accept the price quoted by the care home without question, even though they might feel angry when they find out that the person in the next room to them is being charged less for the same service. Care homes know how their customers behave and price their services accordingly. Even though money is probably the last thing on your mind when you’re thinking about care at a time of crisis, you should always try to negotiate.

3. Prices for private residents are rising fast

This year, the amount local councils are prepared to pay care homes for the people they support financially has fallen in real terms. This has prompted 4 out of 5 care homes to say that they will increase charges for private residents over the coming months. Last year, in some areas, prices rose by as much as 14%. Price rises of this magnitude soon eat into the best laid financial plans. If you negotiate, you’ll make your money go much further.

4. Expect no help from the Government for a while yet

Last week the Coalition Government made some key policy announcements on social care for older people. Dealing with the issue of unfair care funding for private residents was kicked firmly into the long grass. The matter probably won’t be dealt with until after the next General Election and then only if the economy improves. In the meantime, the only way to curb the rising cost of care and beat an unfair system is to negotiate.

Here are two relevant articles from The Telegraph and This Is Money that really show how important it is to negotiate your care home fee.

Most people don’t realise until it’s too late, but care homes charge their residents two different rates for exactly the same service, depending on who is footing the bill. In some cases those paying at the higher rate are being charged 50% more than the person living in the room next to them!

Care homes normally offer their service to private paying residents (known in the jargon as self-funders) and residents who have their fees paid by their local council. In recent years, care homes have started to charge private paying residents more than their local council funded neighbours for exactly the same service. Sometimes the difference can be huge – up to 50% more.

On average, private care home residents are paying £100 per week more than local council funded residents. Depending on who you believe, there are several reasons for this. Care homes claim that local councils don’t pay them an economic fee for residents that they place. Local councils say that they’re just good at negotiating prices. Either way, the situation is set to get worse.

Over the last year, fees for private residents have increased by 14% in some cases. Local councils, in real terms, reduced the amount they are prepared to pay. In response, 4 out of 5 care homes say that they’re going to increase fees for private residents again this year. Rising prices and unfairness look set to be the hallmark of care home funding for another year for many.

Private residents are clearly paying much more than they need, as indicated by Cheselden in a summary titled Self-Funders Paying Up to 50% More Than Council-Funded Care Home Residents.

However, help for private residents, is at hand. iCarehome can help you reduce the cost of your care by negotiating your care home fee with the care home of your choice. If you’re looking for a care home now and you’re worried about spending your children’s inheritance on fees or you’re simply not prepared to subsidise your local council through the back-door, iCarehome can help you to negotiate up to 20% of your fee for care. We don’t always win, though mostly we do, but we guarantee that it won’t cost you anything if we don’t save you anything. A true “no win no fee”!

A survey of 800 care homes in June found that 4 out of 5 care homes intend to increase their charges in the coming months for those people who are responsible for paying their own care home fees. This follows a staggering 14% increase in fees for private residents over just the last 12 months.

Most people don’t realise until it’s too late that the majority of care homes charge private residents more than their local authority funded customers. But both private and local authority funded residents get exactly the same services.

The difference in price, on average, is around £100 per week, rising to £250 per week in some cases. Care homes claim that they have to do this to stay in business, because local authorities don’t pay a commercially viable rate for the clients they place. Private clients are therefore used to subsidise local councils.

Figures released earlier this year show that, on average, local authorities have again cut the amount that they will pay care homes and this is without taking into account inflation. The Government’s failure to deal with rising and unfair care costs in this week’s announcement on social care will guarantee that prices will rise again.

So the financial problems faced by care homes are set to continue, with private residents picking up the tab, as explained in The Telegraph in an article entitled Long-term care costs to hit £38bn by 2025.

If you’re looking for a care home now and you’re worried about spending your children’s inheritance on fees or you’re simply not prepared to subsidise your local council through the back-door, iCarehome can help you to negotiate up to 20% off the fees for the care home of your choice. We win in pretty much every case, but we can guarantee that it won’t cost you anything if we don’t!