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The True Cost of Care

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On 11th February 2013, the Government announced new measures for funding care, due to be introduced in April 2017.

Health Secretary Jeremy Hunt said, of the measures;

“This is a watershed moment for our country. For too long, the issue of social care has been ducked by successive governments, leading to an unfair system that has seen people selling their home and losing nearly everything they’ve worked to pay for their care…..that unfairness is ending….These historic reforms will give everyone the protection they want in their old age and save the family home.”

But is all as it seems?

The Capital Limit

As it stands, care costs are open-ended. If someone in England has assets of more than £23,250, then they have to pay the full cost of their care for as long as they need it. Someone with assets below that, but exceeding £14,250 must pay a contribution.

These allowances also include the value of any property held (unless the individual has a partner who is remaining in the property). This has led to an awful situation, where people have been forced to sell their homes to pay for care.

The Government intend to raise this upper limit to £123,000 and the lower limit to £17,500, thus benefitting an additional estimated 100,000 people.

“The Care Cap”

One of the most reported changes is a proposed cap on individual’s contributions to long term care costs. This cap was recommended in a report by the Dilnot Commission, to give people protection against the risk of unaffordable care costs. The suggested cap by the Dilnot Commission was £25,000 - £50,000. Due to the economic climate however, the cap which the Government intend to fix is £75,000 (for anyone who has reached retirement age).

Those who develop care needs before the retirement age will be afforded a reduced cap on a case by case basis whilst those who have care needs before the age of 18 will have their cap set at zero.

In addition, the cap will only apply to social care costs. People who need residential care will have to continue to meet any additional costs (i.e. food, renting the room, heating, etc) themselves.

The cap will also be calculated not in terms of what people actually pay for their care but rather what the local authority agrees to pay for care.

The Government response to the Dilnot Report was that the care element in 2017 would cost £430 per week, although it would vary between regions. The Government contributions towards care would only begin after the individual has paid £75,000 worth of care at the local authority rate.

Property Sales

The final change promised by the Government is that, as of April 2015, no one will have to sell their homes in their lifetime to pay for their care.

Every Council will have to offer a deferred payments scheme i.e. the weekly care bill will build up as a debt but will not have to be paid until the person dies and the estate can settle the bill.
Notwithstanding this however, interest will be charged on the debt as it accumulates, ultimately reducing the estate.

What this means for you?

Whilst the “care cap” has been welcomed, in reality it does very little to stop the cost of mounting care fees as arguably the most expensive elements are not included in the capped limit i.e. food, rent etc.

As of April 2015, although a person no longer has to sell their home during their lifetime, if the fees become chargeable upon their death, is this not just delaying the inevitable? It also gives rise to uncertainty for individuals as to how much of their estate will be left for their beneficiaries.

In light of this, individuals should be advised to think very carefully about home care fees planning and wealth protection. If you wish to discuss this further, please contact a member of our experienced Private Client team on 0113 246 0622.
 

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