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A government cap on the cost of elderly social care in England is set to be in place in in England by April 2016*. There has been a great deal in the public eye and the media since Andrew Dilnot first made his recommendations in July 2010.
There has also been a great deal of misunderstanding, with many assuming this Cap will be the maximum they will have to pay for care.
Pensioners expecting a government cap on the cost of care to mean help paying their bill are in for a shock.
It has widely, and wrongly, been assumed that the most you can expect to pay for care is £72,000 and that the threshold for local authority financial support is going up from £23,250 to £118,000 per person (or £27,000 if a property is being disregarded).
*NEWS July 2015: The Government has decided to delay the implementation of the Care Cap until 2020
The planned cap on social care costs will help few people.
Sadly £72,000 is not the maximum you will spend on care costs, the cap only applies to eligible care costs and not general living costs such as accommodation and food.
A person’s care cap will only erode by the pre-set weekly amount for the direct cost of care. This figure will be determined by individual Local Authorities.
Local Authority rates do vary quite widely, for example, if a Local Authority rate is around £500 per week, after taking off hotel costs of £230, the care element would then be £270 per week. The exact amount will be determined by individual Local Authorities. This means that your care cap will be eroded at the Local Authority rate regardless of how much your care home actually charges.
We know that the cap does not cover accommodation and living expenses, but only the smaller amount a local authority pays for care. For example, if a Residential Care Home charges £1,000 per week for care, accommodation and living expenses, and the total prevailing Local Authority rate is £500 per week, the amount deemed non-care related (i.e. hotel costs) is likely to be £230 per week and hence the notional level for the “care element” is £270 per week.
Therefore in this example £500 less £230 hotel costs is £270 per week, and it is this £270 weekly rate that is the rate a person’s care account will accrue while they are funding towards the Care Cap of £72,000.
It will take 266 weeks at £270 per week to reach the Cap of £72,000, just over five years. The actual cost that the resident will pay in this example is 266 weeks x full £1,000 per week cost, which is £266,000 – substantially more than the proposed Cap of £72,000. After this time, when the Care Cap has been reached, the resident will still have to pay the extra costs over the Local Authority standard rate. In this example, with a £500 Local Authority rate which includes the ‘hotel’ costs of £230, the client would still have to continue paying the £230 per week, and in addition the extra £500 per week required to meet the total £1,000 per week. Hence this is an ongoing £730 per week, which is £37,960 per year.
Added to the equation is the fact that there will also be an eligibility criteria. It has been suggested that this will be marked as “substantial” which means that many people presently residing in Care Homes may not be eligible, and hence the clock will not actually start ticking towards this Care Cap at the present time. This will form part of a “national eligibility criteria”.
New national eligibility criteria
The widely awaited publication of the regulation setting the new national eligibility criteria confirms that the threshold for receiving local authority care will remain high. It states that ‘there has to be a significant impact on the adult’s well-being’ before that adult is deemed as having eligible needs.
Effectively this means that in reality many older people will need to fund their own care costs before social services step in.
By setting the eligibility criteria high for the care system, it is a bit like going to your GP with a common cold and being told to come back with pneumonia.
We have already seen that the Cap is not a Cap on total costs of care at all, and in fact you are likely to need to spend around five times this; with a Care Home that costs around £1,000 per week, using the above example it would take five years to hit the cap.
An expensive Care Home will use the Cap more quickly…
Everyone’s care cap will be eroded at their prevailing Local Authority rate regardless of how much individual care homes actually charge, so the Care Home fees are irrelevant when calculating how
long it will take for the Cap to take effect.
As soon as you have spent the £72,000 cap there is no need to worry about costs of care….
You may not need to worry about paying the set rate for the care element however you will still be liable for accommodation and living costs (£230), and all the fees over the Local Authority rate which would be a further £500 per week in the example above.
The local authority can force me to sell my property to pay for residential care….
The Government’s proposed scheme, known as the Universal Deferred Payment Scheme may mean a property need not be sold during the person’s lifetime. However, it could be more advantageous to choose to sell the property and use the capital to fund the care. (There are various circumstances where the property is excluded as explained further in the Q & A section of the website). You should always consider all of the options for paying care fees and discuss with a qualified financial adviser.
If my capital falls below £118,000 I no longer have to pay for care costs….
Even if someone has capital below the proposed £118,000 new threshold, they will still be expected to contribute out of their income and capital if they can afford it. They will be subject to “Tariff Income”, much like residents with capital below the current threshold now. People are charged £1 per week for every £250 of assets on amounts falling between the lower and upper threshold at present. The future level of Tariff Income after April 2016 is still to be decided by the government (*see NEWS above, now delayed to 2020). Where the property is being disregarded, it is important to note that the threshold will be a much lower amount of £27,000. However, the local authority will pay the weekly fees associated with the “care element” only based on their figure at the time.
I have been in Care for a few years and have already paid towards my Cap…..
Unfortunately the cap will only apply to Care costs incurred after it has been introduced in April 2016 (*see NEWS above, now delayed to 2020) and only if an assessment has been carried out and eligible care needs have been established. See “New Eligibility Criteria” above, only after someone is deemed as having eligible needs will a person’s care account accrue towards the Cap. This needs to be assessed as “high” or “severe” before fees start counting towards the Cap.
There is no point in seeking financial advice as the Local Authority will sort it all out…
Finding the best care fees solution can be an emotional, practical and financial strain on the whole family. Our role is simply to take those pressures away by opening the door to all of the choices available to you and securing the best quality of life for you and your loved ones.
If you have assets and want to retain control of your finances so you can make your own choice as to where you receive care, it is important to consider all of the options and their consequences before making any decisions. We can use financial care plans to remove the worry of running out of money and to ring-fence any remaining estate for inheritance.
Simply having the security of knowing that you, a family member or someone else that you love will be looked after, and that the income to do so is guaranteed for the rest of their life is priceless.
As Care Fees Planning specialists who are accredited by The Society of Later Life Advisers* (SOLLA) we can show you whether it is possible to secure care at the first choice of home for the rest of the individual’s life. This can give all the family peace of mind that care fees are being met indefinitely, that they will not run out of money and fall into the hands of the Local Authority.
For a personal review without obligation, call one of our advisers today on 01582 794967