New social care reforms will see a major shake-up of how care is funded in England.
In November 2021, MPs voted through social care reforms including an £86,000 cap on the amount people will have to pay towards their personal care.
Prime minister Boris Johnson commented: “We will protect individuals and families against unpredictable and potentially catastrophic care costs – so that from October 2023, no eligible person starting adult social care will have to pay more than £86,000 for personal care over their lifetime.”
More than a million people in England receive social care, and many more will need care as the population ages. The average weekly cost for a place in a residential care home is an eye-watering £776.
However, the reforms have come under heavy criticism. Experts argue that care costs will still be unpredictable because the care cap doesn’t cover everything, and that those with low levels of savings will be disproportionately affected.
"Is that it?" Shadow social care minister Liz Kendall's responds to the government's social care reforms"Ministers have utterly failed to deal with the immediate pressures facing social care as we head into one of the most difficult winters," she sayshttps://t.co/necrRl5yIm pic.twitter.com/dNz35DO1RADecember 1, 2021
According to research by interactive investor almost a third of retired people rank the prospect of not being able to afford good quality, long-term care among their top three financial concerns.
We explain how the rules will work, as well as the new tax levy that will help pay for it. Plus, what you can do now to get financial advice and help prepare for the cost of your future care.
Social care reforms – what is changing?
There is currently no limit on the amount someone can pay for personal care during their lifetime. In October 2023, a cap will be introduced, so that the most anyone will have to pay is £86,000. This covers care received at home and in a care home.
In addition, anyone with less than £100,000 in assets will be able to receive some financial support from their local council. This is a significant rise from the current level of £23,250.
Anyone with less than £20,000 in total will not have to pay anything for their care. This is an increase from the current level of £14,250.
How will the new cap work?
The cap will be implemented for adults that are assessed as having eligible care and support needs. It will apply to new entrants or existing social care users, however, costs accrued before October 2023 will not count towards the limit.
The cap will apply to the cost of care, such as washing and dressing. However, it does not cover living costs. This includes rent, food and utility bills.
For someone living in a care home, a rate of £200 a week must be paid to cover daily living costs. This will not count towards the cap.
Any top-up payments, such as additional care or for a premium room, will not count towards the cap. If someone receives means-tested help as they have less than £100,000 in assets, this money won’t count towards the cap either.
When someone has almost reached the cap, their local council will inform them, and plans will be made so the council can take over paying for the personal care.
“The £86,000 cap will undoubtedly help contain the amount people have to pay for care but the fact that this does not cover so-called hotel costs means those in care and their families still need to battle hugely unpredictable costs on an ongoing basis,” notes Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown.
Tom Selby, head of retirement policy at the investment platform AJ Bell, says the cap on costs is better than nothing but adds that “£86,000 remains a humongous bill and paying it would be a significant challenge for most people”.
Will I have to sell my home to pay for care?
From October 2023, anyone with less than £100,000 in assets will receive some financial help from their local council.
But, what does “assets” mean? Does it include your home? Well, it depends. If you are receiving care at home or if you are in a care home and your spouse is living in your home, the value of the home is not counted. However, if you go into a care home and you do not have a spouse living in your home, the value of your home is counted towards your assets and you may have to sell it.
Bear in mind that people receiving care still need to pay for living costs, as this is not covered by the cap, and there is no financial help for this either. So, to continue paying the living costs part of a care home bill, some residents may need to sell their home. However, anyone in this position can apply to have the sale of their home delayed until after they die; the council will pay the costs upfront and reclaim them from the sale of the home after the homeowner passes away.
Critics say that people with lower-value homes and less money in savings will be unfairly impacted by the reforms. “It’s a huge blow to anyone with lower levels of assets, especially people in the North, where in many places house prices tend to be lower than further south,” adds Morrissey.
How will the social care reforms be paid for?
National Insurance contributions (NICs) will rise by 1.25 percentage points from next April to pay for social care and help fund the NHS. This applies to employers and individuals.
From April 2023, the payment will become a separate tax, known as the Health and Social Care Levy. The revenue will be ring-fenced to support UK health and social care bodies.
Those above state pension age will not be affected by the temporary increase to NICs for the 2022-23 tax year but will be liable to pay the levy from April 2023.
The government expects the measure to raise about £12bn in extra funding each year.
Help with the cost of caring
No one knows exactly how much care they may need in later life, and what it will cost. Some people may be fortunate enough to have fairly minor caring needs and have a loved one that can help them.
For many others, professional care will be needed, partly funded by their life savings, such as ISAs and pensions. Some people may opt to do equity release and access the cash in their home.
However, as well as the measures being introduced in two years’ time, there is some financial support available right now, via government benefits or from your local council.
Attendance Allowance helps with extra costs if you have a disability severe enough that you need someone to help look after you, while Personal Independence Payment can help if you have a long-term physical or mental health condition or disability and are finding it difficult to do certain everyday tasks.
Being in receipt of Attendance Allowance means you could get help with other costs, such as reduced council tax.
There are some services that councils have to provide free of charge if you've been assessed as needing them. These aren't means-tested and it doesn't matter what your income is. They include equipment or home adaptations that cost less than £1,000, for example, handrails for the stairs, a wheelchair ramp or a walking frame. Council must also organise care after you have been discharged from hospital.
Finally, don’t forget Carer’s Allowance. If you opt to be cared for at home and a friend or relative cares for you for at least 35 hours a week, they can apply for Carer’s Allowance. This is worth £67.60 a week.
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Ruth Emery is contributing editor at The Money Edit. Ruth is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times. A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service. Outside of work, she is a mum to two young children, a magistrate and an NHS volunteer.
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