As a result of the nation living longer, there are an increased number of people who require assistance and care in their later years. We advise and assist many clients on issues relating to planning for and funding care. Often families who we meet are confused how care is organised and paid for when needed.
This blog aims to set out the current funding system in place, the problems with this and the recent recommendations from the Dilnot Commission.
The current system
The current funding system in England is means tested. Broadly, people with assets over £23,250 (20011/12) will be “self funders” and therefore are required to pay for the full cost of their care themselves. Costs of care vary greatly depending on the level of care needed by the individual, whether they require residential or nursing care, their location and the standard of living that they and their family want. From experience, some care homes in Leeds can charge nearly £1000 per week for residential nursing care.
The value of assets taken into account during a local authority’s financial assessment, includes all assets held in the sole name of the individual and shares of joint assets and property, with some exemptions.
For individuals with assets less than £23,250, the means test ascertains how much the individual should pay towards the cost of their care. If you have assets less than £14,250 the local authority asks that you contribute your income (e.g. pensions) leaving you with a statutory personal expenses allowance of £22.60 per week, and the local authority pay the rest of your care costs up to a maximum figure.
Problems with the current system
The statistics show that around 1 in 10 people at age 65 face future lifetime care costs of more than £100,000. As a result there is great likelihood that assets such as property will have to be sold to fund the care. This is regarded by the majority of our clients as highly unfair.
We can advise on planning for care costs. We can also advise on benefits and special funding which are available to offset care fees but not everyone has access to legal advice or can afford the insurance costs up front.
As a result, over the past year the Dilnot Commission has been consulting on how to change the present system to make it fairer for all. They have recommended a capped cost model as the best way to achieve that.
The recommendations from the Dilnot Commission
The recommendation is that individuals would be responsible for their own care costs up to a certain amount, but after that the state would pay. Everyone would have the advantage of knowing up front what maximum cost would be.
The cap suggested by the Commission is £35,000.
Those who couldn’t afford fully to make their contribution initially would continue to receive means-tested support.
They recommend however that the threshold under which the local authority would assist with care fees should also be raised from £23,250 to £100,000.
Mrs Smith lives alone in her own home and including the value of her house and savings has assets worth £180,000. She has dementia and needs to go into a residential care home when she is 83 years old for the last 5 years of her life. The cost of her care is £500 per week, being £26,000 a year.
Under the current system = the family had to sell the home to use the money to pay for her care. Due to her assets being over £23,250 she would be a self funder. When she died after 5 years in care, she had spent £130,000 on her care fees through her pension income and housing wealth. 72% of her capital wealth was therefore used in her care fees.
Under the proposed system = after 70 weeks in care at £500 per week she will have reached her £35,000 cap. After this, the state would continue to pay her care costs and she would just pay for her general living costs out of her pension. Only 19% of her capital wealth was therefore used in care fees.
Contributing to general living costs
As well as the cap on the care costs the Commission has also recommended clarifying the contribution an individual in care should make towards their general living costs. Under the new proposals people in residential care will be responsible for making some contribution towards their general living costs, such as food and accommodation – just as they would be expected to cover these costs if they were living at home. A limit however will be sent on this contribution.
The Commission has suggested £10,000 a year contribution which would work out to be approximately £190 per week. This is the maximum contribution the Commission thinks an individual should make. To make this contribution the individual would need to contribute from their income, savings or other assets, in addition to their state pension. It is likely that if the individual cannot afford this however a means tested system will be in place.
Reforms to the means tested system
As stated above, the Commission does recommend for those who cannot afford £35,000 full personal contribution or the £10,000 contribution towards general living costs, means tested support is available.
The current system is complex, it doesn’t encourage people to save for the future and is perceived as unfair. The Commission therefore recommends increasing the threshold under which local authority assistance is available to £100,000. This means that more people would be eligible for support and will offer more protection for homeowners.
We await in anticipation as to whether the government will action the Dilnot Commission’s recommendations. In the meantime we continue to offer advice and guidance to our clients in relation to the various ways to fund care. If you wish to discuss care funding, challenging local authority/PCT decisions or long term care fee planning please contact Stephanie Dunderdale on email@example.com or on 0113 336 3355.
Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.