Boris Johnson’s overhaul of social care will cost billions but is unlikely to spare families the agony of having to raid their savings and sell their homes to pay for nursing and residential home care. Here are seven reasons why social care fees will continue to swallow your family’s wealth.
1. The cap is too high. In 2010, the Dilnot Commission’s review of long-term care recommended a cap of just £35,000.
The £86,000 cap chosen by Boris is dramatically higher, having increased by much more than inflation in the interim.
Shaun Moore, tax and financial planning expert at Quilter said: “This will place a pretty sizeable burden on individuals to stump up huge costs for their care provision.”
2. It doesn’t cover all care costs. If somebody requires an extended stay in nursing care home, their total bill could still run to hundreds of thousands of pounds.
That’s because the £86,000 cap only applies to personal care costs. It does not cover daily living costs such as food and accommodation, which can easily add up to £1,000 a month.
These could race pass £200,000 well before a family spends the maximum £86,000 on the personal care element, Just Group calculates.
Even after qualifying for the cap, those daily living costs will continue. Some could pay as much as £400,000.
3. Families will still have to sell their homes. Every year, around 20,000 people have to sell their homes to meet care costs and Louise Higham, financial planning director at Tilney, said this is unlikely to change.
“Families should not get drawn into a false sense of security that their care needs will be taken care of, and many will still have to sell homes to pay for care under the new system.”
4. People cannot save enough to meet care costs. Higham urged people to save more money to pay for care costs in later life, but in practice most people won’t because of the uncertainty and complexity.
Many will not have barely have enough money to meet everyday living costs in retirement, let alone set money aside for care they may never need.
5. The cap doesn’t come into force for two years. The £86,000 social care cap will not come apply until October 2023. People will only start accumulating funds in their care account after that date. Money spent on care home fees 2023 before this point will not count towards the cap.
This means that anybody in care today is unlikely to benefit at all.
6. The floor is still too low. The Government also lifted the “floor” at which point the local authority will pay for care costs.
Currently, local authorities only make a contribution once the person’s assets have fallen below £23,250 in England, and only cover the full cost after they have dwindled to just £14,250.
From October 2023, these will be raised so that help becomes available once savings fall below £100,000, but local authorities will only meet full costs once savings fall below a meagre £20,000.
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Morgan Vine, head of policy and influencing at charity Independent Age, said we have no idea how much help local authorities will offer once savings fall below £100,000. “I still expect many needing care will still use up almost all of their savings and property wealth.”
7. Tracking care costs will be tricky. Seven in 10 over 45s who have had to organise care for a family member said they found the care system complex and were shocked at how much it costs, Just Group research shows.
If anything, it is going to get more confusing, because local authorities will now have to track how much people are spending on personal care, in order to calculate the cap accurately.
Mike Stimpson, partner at wealth manager Saltus, said we need more clarification on how the cap will be administered, tracked and recorded. “It is quite likely that the Government will not fund private, more expensive care homes once people hit the cap, possibly forcing people to move care home or pay the full cost themselves.”
Given all these challenges, more family inheritances will be destroyed by social care costs despite the reforms.