Spending cap: Daily living costs and top-ups for better accommodation will not count towards the limit
The Government’s plans for an £86,000 social care spending cap are under fire after it emerged only the wealthy will be protected against catastrophic financial losses.
Critics of the newly-published rules say poorer people could still spend most of their assets including their home if they need care, while the better off would forfeit a relatively small chunk of their wealth.
The new £86,000 lifetime spending cap will be based on some, but not all, of people’s private contributions towards care, rather than on their total costs.
It will exclude anything local authorities deem unnecessary or not ‘eligible’ for your care, any financial support they provide towards your costs, top-up payments you might make for premium amenities like better rooms, daily living or ‘hotel and accommodation’ costs, and any spending on care before October 2023.
A related revamp will adjust the thresholds at which financial help kicks in for people who can’t afford care.
Influential expert Andrew Dilnot, who called for a cap in a major review a decade ago, slammed the plan saying he was ‘very disappointed’.
Torsten Bell, chief executive of the Resolution Foundation, tweeted: ‘If you own a £1m house in the home counties, over 90% of your assets are protected. If you’ve got a terraced house in Hartlepool (worth £70k) you can lose almost everything.’
Helen Morrissey, pensions expert at Hargreaves Lansdown, said: ‘An awful lot of people will be paying far more towards the cost of care than they may have expected.
‘Not everything you spend on care counts towards the cap, and even when you reach it, you may still need to keep paying for your care.’
Age UK boss Caroline Abrahams said: ‘The cap will disproportionately benefit those living in the south, rather than the north, where house prices are that much lower, flying in the face of the Government’s ‘levelling up’ agenda.’
The Government announced several months ago it would hike National Insurance contributions by 1.25 per cent from next April to fund health and social care.
However, details of the new £86,000 care spending cap were published on Wednesday night.
We take a look at what will happen when the plans are launched in late 2023 and round up reaction below.
How will the £86k spending cap work?
The average self-funder in a care home that costs £776 a week will have to pay the whole amount for more than four years before they get any help from the state
The Government says the cap will put an upper limit on what people have to spend to meet their ‘eligible’ care and support needs.
What counts as eligible will be decided by your council, and what kind of spending is included in the cap is subject to the exclusions explained above.
The Government says: ‘The cap will be implemented for adults of all ages, without exemption.
‘Everyone will have a care account which will be maintained by the local authority and will keep track of their progress towards the cap.
‘Local authorities will provide regular care account statements, and engage early with the person once they are close to approaching the cap to discuss how their needs will be met.’
Meanwhile, anyone who already has care needs the council regards as eligible will only see financial contributions start counting towards their cap in October 2023.
‘Before the cap comes into effect, local authorities need to work to identify people who currently meet their eligible needs themselves, to ensure that they can begin progressing towards the cap from the point it comes into effect,’ says the plan.
Councils will provide a ‘personal budget’ if they are going to meet someone’s needs, or an ‘independent personal budget’ if someone is paying for their own care.
‘The personal budget will set out the cost to the local authority of the care they have arranged, whereas the IPB sets out what it would have cost the local authority to meet the person’s needs.’
Local authorities will be responsible for telling people once they have reached the spending cap.
What about daily living costs?
The Government points out that rent, food and utility bills and would have to be paid wherever someone lives.
These costs will be set at a national, ‘notional’ amount of £200 per week, and people will remain responsible for them both before and after they reach the £86,000 spending cap.
Meanwhile, ‘top ups’ for a preferred choice of accommodation or care arrangement, to secure a premium room or furnishings for example, will not count towards the cap and will also still have to be paid after it is reached.
What about people who can’t afford to pay for care?
The Government says the ‘upper capital limit’ at which people become eligible to receive some financial support from their local authority will rise to £100,000 from the current £23,250.
‘People with less than £100,000 of chargeable assets will never contribute more than 20 per cent of these assets per year,’ it explains.
‘The UCL of £100,000 will apply universally, irrespective of the circumstances or setting in which an individual receives care.
‘The lower capital limit, the threshold below which people will not have to pay anything for their care from their assets will increase to £20,000 from £14,250.’ See the table below.
Source: Department of Health and Social Care
The Government adds that this ‘much more generous means test’ will be the main means of helping people with lower assets after the £86,000 spending cap is introduced.
It says that to allow people receiving support to keep more of their own income, it will unfreeze the ‘minimum income guarantee’ for those receiving care in their own homes and the’personal expenses allowance’ for care home residents, so that from April 2022 both will rise in line with inflation.
What do financial experts say?
‘The average self-funder in a care home that costs £776 a week will have to pay the whole amount for more than four years before they get any help from the state,’ said Stephen Lowe, group communications director at Just Group.
‘If they need care for six years, they will pay more than £200,000.’ See the table below for how this could work.
Just Group says: ‘Initially the self-funder pays all the costs and £396 a week (£596 minus the £200 Daily Living Costs) of that spending is assessed as counting towards the £86,000 cap on personal care costs. The resident’s total spending on personal care reaches the cap after 217 weeks at which point the local authority starts to pay the £396 personal care cost. The resident remains responsible for paying the remaining £380 a week cost which includes the £200 DLCs
‘What is emerging is a very complex system that many people will need help to plan for and to navigate successfully,’ Lowe went on.
‘There will be people whom councils judge do not have eligible needs but those individuals may choose to purchase extra help and, of course, many people who will want more than the very basic standard and quality of care provided by local authorities.
‘For those with long-term conditions such as dementia, meeting care costs could be a significant spend over a long period.’
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said: ‘This is a real blow for people with less income and savings, who will now have to spend far more of it on care before they reach the care cap, because any benefits they put towards the cost of care won’t be counted.
‘There’s also bad news for those who want a higher level of care, because the local authority will assess how much care you need, and only this spending will count towards the cap.
‘If you pay for additional care to make life less difficult, such as longer visits in your home, or amenities in your care home room, none of this will count towards the care cap.’
STEVE WEBB ANSWERS YOUR PENSION QUESTIONS
‘When someone needs care, the real financial strain comes from the fact that nobody has any idea how much care they will need, and how much it will cost.
‘The reforms were meant to change that situation, but people still won’t know what the care will cost them.’
Morrissey added: ‘MPs are due to vote on this next week and it will be interesting to see if this causes the same amount of anger that the decision to suspend the state pension triple lock did earlier this week.
‘We should expect to see MPs push back on behalf of their most vulnerable constituents.’
Caroline Abrahams, charity director at Age UK, said: ‘The change the Government has announced makes the overall scheme a lot less helpful to older people with modest assets than anyone had expected.
‘It waters down Sir Andrew Dilnot’s original proposal to save the Government some money, but at the cost of protecting the finances of older home owners who are not terribly affluent if they need care for a long time.
‘This feels like completely the wrong policy choice and we are extremely disappointed that the Government has made it – and that it is only announcing it now, rather than two months ago when the Prime Minister set out his plan. Unfortunately, its impact is such that it is more than a mere “tweak”‘.
‘The Government was already under fire for making the design of its cap insufficiently progressive, but their proposed change tilts the balance further away still from providing this kind of support to the older people who need it the most – those who have built up some assets over their working lives but are still by no means well off, plus those older people living on their state pension with few if anyone savings at all.
‘Its practical impact is that fewer older people will be able to pass on an inheritance to their loved ones in poorer areas than had been hoped because their care bills will take all the money they have, and that’s a real shame.’
TOP SIPPS FOR DIY PENSION INVESTORS
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.