What does the new 75k care cost cap mean to you?

Last week health Secretary Jeremy Hunt announced his plan for the social care reform – a £75,000 cap on care costs.

Here’s a study I have come across recently, that illustrates what the cap is really worth.

Jeremy Hunt claimed: ‘These historic reforms will give everyone the protection they want in their old age and save the family home’.

This may prove misleading. Only those with substantial assets – in addition to their property – will be able to protect their home.

In July 2011 Andrew Dilnot’s Commission on Funding of Care and Support prepared a report ‘Fairer Care Funding’ on which these new reforms are based. They recommended a cap between £25,000 and £50,000, with £35,000 as an ‘appropriate and fair figure’. The proposed cap is £25,000 bigger than the higher recommended figure.

It is important to understand that this is a cap on care costs alone, which make up around a third of care home fees.

We have yet to see at what level local authorities set the rate they will pay for care costs, however it is expected to be around £200 per week.

Here’s an example of how it would work in the real life.
A residential care home charging £600 a week in a region where the local authority has a care rate at £200 a week will split its weekly fee as £200 for care and £400 for the ‘hotel bill’ (i.e. accommodation, food, heating, etc.). It is unlikely that any care home will allocate a higher slice of its fee to care costs, as this would mean taking a cut in income for any residents that reach the cap.

The maths shows the limited value of the cap. At this rate you would have to spend 375 weeks in care, paying full amount, before qualifying for government’s help. That’s over 7 years and this means £150,000 bill for food and lodging - £225,000 in total. It is worth noting that the average stay in a BUPA home is 2 years[1].

According to proposed legislation, unless you own a property and have £225,000 on other assets, you will be required to sell your home, should you need long term care. Ros Altman, Director General of over 50s group Saga, quoted by the Daily Mail[2], said that this cap is too high, and most people will lose all their money.

The cap is a state benefit for the wealthy and will have little impact on the majority of those moving into care.

All the publicity about the care funding reform neglects one key fact – there is a way to save yourself, and your family, all the aggravation and expense of long term care costs. Setting up a Family Trust is even mentioned on the government’s website[3] as a way of “Keeping your home and assets”. Contact us – even if it is just to ask questions and get more information – we may be able to help.

 

Best regards,

Dan Attfield
Director of Estate Planning
Affinity Legal Group
t: 0800 731 3071 (option 1)



[2] Care bill for pensioners capped at £75,000 - but thousands will still be forced to sell their homes, by Daniel Miller, published: 11:23, 19 January 2013, http://www.affinity-wills.co.uk/carecostcapmailonline