As many readers will be aware, the government has recently announced its proposed changes to the current system of care funding.
Firstly, it is important to remember that these are at present only proposals and, in any event, will not be coming into effect until April 2017. Therefore, anyone requring residential care before the changes are made law would be assessed under the current rules.
Before we examine each of the proposed changes in detail and how it will affect people in real terms:
The care cost element is to be capped at £75,000
It is important to note that this cap only covers the care element of the charges, not the 'hotel charges' which also apply to residents and cover the cost of living in the home. On average, the 'care element' of the fees only amounts to around 1/3 of the total bill and therefore, once you have paid £75,000 towards care and hit the cap, you will have actually paid more than £200,000 in total fees. A cap of £12,500 per annum has been proposed in relation to the 'hotel charges'.
Matters are further complicated by the fact that the cap is not based on what each individual actually pays for their care, but what they would have paid if they were in a local authority funded home. Therefore, if you are a self-funded resident in a private care home, you may be paying substantially more than a socially funded resident; but will only reach the cap when the local authority calculates that you would have reached the cap in one of thier homes.
You may recall that when a cap was first recommended by the Dilnot Commission in July 2011, the amount suggested was £35,000. The £75,000 cap now proposed is more than twice that original figure.
The average stay in a care home is 2-3 years but it is estimated that you would have to be resident for 4-5 years before the new cap on fees would 'kick-in', as based on local authority costs it would take that long to accrue the necessary £75,000.
People will no longer be required to sell their home to fund care
The government is placing much emphasis on the fact that people will no longer have to sell thier homes in their lifetime to pay for care. However, this is misleading as it does not mean they will retain the home for their children, rather they will just be postponing the inevitable sale until after their death.
If there are no liquid assets available to fund care, then the money to pay for care will effectively be 'lent' to the resident by the local authority, with interest charged from the outset, and their home will then be sold upon the death in order to satisfy this debt.
The upper threshold for qualifying for 'publicly-funded care' is increasing from £23,250 to £123,000
This is one positive move which will benefit a number of people with estates worth under the new revised £123,000 limit. However, in many areas, particularly in the South-East, most people's homes alone are worth in excess of this.
The lower limit remains £14,250 and therefore residents worth between £14,250 and £123,000 will still have to pay tariff income of up to £435 per week towards their care.
To summarise, whilst these proposals are a step in the right direction, they are not a solution to the problem of care funding which affects thousands of people every year. A large number of residents will still lose their homes-albeit after they have died- and have their assets depleted.
It is still prudent to consider the possibility of requiring residential care as a major threat to your estate and plan accordingly.
