Fair Deal Scheme Ireland: Complete Guide to Nursing Home Financial Support

The Fair Deal Scheme in Ireland provides financial support to help pay for long-term nursing home care when you or a loved one needs it most. If you're wondering whether you qualify, what it costs, or how the scheme works, this comprehensive guide explains everything you need to know.

What is the Fair Deal Scheme?

The Fair Deal Scheme (also called the Nursing Home Support Scheme) is the Irish government's primary method of providing financial support for people needing care in residential facilities. The scheme works on a simple principle: you contribute towards the cost of your care based on your income and assets, and the HSE pays the balance.

Currently, over 30,000 people benefit from this scheme across Ireland. Importantly, 5% of recipients are under 65, so it's not exclusively for elderly people requiring long-term nursing home care.

Key Facts:

• Average length of stay: 3 years
• Average annual cost: €60,000
• The state spends €1 billion annually on the scheme
• Long-term care costs typically increase by 5% per year

Who Qualifies for the Fair Deal Scheme?

To apply for financial support under the Fair Deal Scheme, you must be:

• An ordinary resident of Ireland (living here for at least one year, or intending to live here for at least one year)
• Assessed as needing long-term nursing home care by healthcare professionals
• Willing to undergo a fair deal financial assessment

The scheme provides financial assistance regardless of age, though most applicants are over 65.

How the Fair Deal Scheme Works: The Application Process

The application process involves three distinct steps:

Step 1: Care Needs Assessment

Healthcare professionals assess whether you need long-term nursing home care. This first assessment determines if residential care is medically necessary.

Step 2: Financial Assessment

A fair deal financial assessment will look at your income and assets to work out how much you can afford to pay towards your care. The HSE will pay the money to cover the remaining costs.

Step 3: Optional Nursing Home Loan (Ancillary State Support)

If you're applying for an optional nursing home loan, you can defer some payments using your home as security. This loan is for those who have assets but limited cash flow.

Important: The form should be completed and signed by the person applying for nursing home care. However, in certain circumstances, someone else may apply on their behalf. The nursing home you choose must be an approved nursing facility listed by the HSE.

Fair Deal Financial Assessment: How Much You'll Pay

The scheme provides financial support based on a means test of your income and assets. Here's how contributions are calculated:

For Single People:

• Income: 80% of your total income goes towards the cost of care
• Assets: 7.5% of assets (after €36,000 asset disregard)
• Principal Residence: 7.5% annually (capped at 3 years maximum)

For Married Couples:

When one partner needs care, the couple's income and assets are assessed together:

• Income: 40% of combined income
• Assets: 3.75% of combined assets (after €72,000 asset disregard)
• Family Home: 3.75% annually (capped at 3 years maximum)

What Income is Included in the Financial Assessment?

• Earnings and pensions
• Social welfare benefits
• Rental income from property
• Investment income

Allowable Deductions:

• Income Tax, PRSI, USC
• Local Property Tax
• Medical Card Prescription Levy
• Private medical expenses
• Certain borrowings
• Maintenance payments
• Rent on principal residence (in specific circumstances)

Key Protection: Your principal residence value is taken out of the financial assessment after 3 years in care, providing significant protection for your family home.

Fair Deal Scheme Examples: Real-World Scenarios

Example 1: Single Person with Limited Assets

Situation: Local authority tenant with basic pension and small savings

• Contributory Pension: €12,900
• Private Pension: €10,000
• Savings: €10,000
• Assets: Local authority tenant (no home)

Calculation:

• 80% of income: €18,320
• 7.5% of cash assets: €0 (below €36,000 threshold)
• Total yearly contribution: €18,320

This person should definitely apply for financial support as the state support will cover most care costs.

Example 2: Wealthy Couple

Situation: High-net-worth couple with substantial assets

• Combined pensions: €77,000
• Private pension: €65,000
• Savings: €60,000
• Investments: €300,000
• Family home: €1,000,000

Calculation:

• 40% of income: €35,960
• 3.75% of assets: €10,800
• 3.75% of family home: €37,500
• Total yearly contribution: €84,260

This couple's income and assets will likely exceed the cost of care in most approved nursing homes. The Fair Deal Scheme may not provide significant financial assistance given their substantial means.

Example 3: Strategic Planning Success

Situation: Couple who planned ahead by gifting assets and downsizing

• Combined pensions: €45,800
• Private pension: €20,000
• Savings: €50,000
• Investments: €20,000
• Family home: €350,000 (downsized)

Years 1-3 contribution: €31,445 Year 4+ contribution: €18,320 (no more home charges)

This demonstrates how proper financial planning can significantly reduce long-term care costs.

Should You Apply for the Fair Deal Scheme?

This decision requires careful consideration as part of your overall financial plan. Here are key factors to evaluate:

When the Scheme Makes Sense:

• Your income and assets are modest
• You expect to need care for several years
• You want protection for your family home after 3 years
• You need state support to afford quality care

When Private Pay Might Be Better:

• You have substantial assets that would result in high contributions
• You can claim tax relief on private nursing home costs
• You want complete choice of care facility
• You're planning significant asset transfers

The Five-Year Rule

Any gifts or asset transfers in the five years prior to your application will be included in the financial assessment. This "look back" rule means advance planning is crucial.

Ancillary State Support: The Optional Nursing Home Loan

For those who are "asset rich" but "cash poor," you can apply for financial assistance through the optional nursing home loan. This allows you to:

• Defer your weekly contribution based on property value
• Continue living with reduced immediate costs
• Repay when the property is sold or from your estate

How It Works:

• The state takes a lien on your property
• Consumer Price Index may be added to the loan
• Repayment of the loan occurs on death, sale, or transfer of property
• Partners or family members living in the home can apply for deferral

Planning Strategies for the Fair Deal Scheme

Effective Asset Transfer Methods

Many clients explore gifting assets to reduce their assessment. However, this requires careful planning:

Family Investment Accounts: Set up joint investment accounts with children as members, maintaining some control through voting rights while reducing assessable assets.

Regular Gifting: Use annual gift allowances (€3,000 per child) to gradually reduce assets, though gifts in the 5 years prior to application are still assessed.

Property Planning: Consider downsizing or restructuring property ownership well in advance of potential care needs.

Tax Considerations

If you choose to pay privately for care, you can claim tax relief at your marginal rate. This option might be more cost-effective for high-net-worth individuals.

Estate and Inheritance Planning

The Fair Deal Scheme should be integrated with your broader estate planning and family wealth transfer strategy. Consider the tax implications of financial gifts to your children as part of your overall approach.

Issues with the Current System

Recent figures show that HSE-run homes receive significantly higher payments (€1,564 per week) compared to private facilities (€968 per week) under the scheme. This creates potential inequities in the system.

Additionally, the scheme has a capped budget that can lead to waiting lists when demand exceeds available funding. As Ireland's population ages, pressure on the system continues to grow.

Cash Flow Planning and Care Costs

Before making decisions about the Fair Deal Scheme, consider conducting cash flow modelling to understand the long-term impact on your wealth. This analysis helps you:

• Compare costs of private versus Fair Deal funding
• Understand the financial impact on your estate
• Plan for different care duration scenarios
• Make informed decisions about asset transfers

Next Steps: Getting Professional Advice

The Fair Deal Scheme involves complex financial and legal considerations that can have lasting impacts on your family's wealth. Key areas requiring professional guidance include:

• Timing of applications and asset transfers
• Integration with your overall retirement and estate planning
• Tax efficiency strategies
• Care funding options and alternatives

Remember: You don't need to apply for the Fair Deal Scheme immediately upon entering care. The application can be made later if circumstances change, giving you flexibility in your planning.

Contact Us for Fair Deal Planning

The Fair Deal Scheme should be considered as part of your comprehensive retirement and care planning strategy. Our team of Certified Financial Planners can help you:

• Assess whether the scheme is right for your situation
• Develop strategies to optimise your care funding
• Integrate Fair Deal planning with your broader financial plan
• Navigate the complex application process

Contact us today to schedule a consultation where we can discuss your unique circumstances and help you make informed decisions about your care planning needs.

The Fair Deal Scheme provides essential financial support for those needing long-term care, but the right approach depends entirely on your personal circumstances. Professional advice ensures you make decisions that protect both your care needs and your family's financial future.