Mind the Cap
The £86,000 cap on care liabilities is the centrepiece of the government’s long-awaited reform of adult social care funding in England, due to come into force in October 2023.
Alongside the cap, the capital limits for care funding will be relaxed. What this means is that anyone whose assets, including their home where applicable, do not exceed £20,000 (up from £14,250, currently) will not have to fund their care, however, they may still need to make a contribution towards their care from their income. Those whose assets do exceed £20,000 but are less than £100,000, (up from the current £23,250) including their home where applicable, will be able to access partial state funding. They will be expected to contribute towards the cost of their care from their income, but if that is not sufficient, they will contribute no more than 20% of their chargeable assets per year.
This cap looks generous; however, it is not as simple as it looks, and a lot of people now incorrectly believe that they will not pay more than £86,000 for their later life care.
The cap only relates to ‘personal care’ costs and not costs for ‘hotel’ costs such as accommodation and meals. In addition, the care costs relate to the costs based on what the local authority believes is an appropriate fee, meaning if anyone selects a care home that charges above the average, then the extra costs will not count towards the cap.
What does this mean?
For example, someone in care paying £800 per week, where the ‘hotel’ costs amount to £250 and in this case the local authority has deemed the appropriate weekly fee to be £600, the amount that counts towards the care cap is £350. This is purely to provide an example, the actual figures you pay would be determined by the local authority/care home you select.
How is this calculated?
The actual figure used against care cap would be the local authority care budget figure – in this case £600, less hotel cost – in this case £250, which would mean that only £350 per week will count towards the care cap. Based on the figure of £350 per week this means that the care cap would be reached in 245 weeks or 4.7 years.
While many may never reach the care cap limit as average life expectancy for someone going into a residential care home is 2 years it is important to highlight that regardless of whether someone reaches the care cap or not there will be costs associated with a relative’s care.
Using the example above, someone paying £800 per week for care who does remain in care and reaches the care cap, the person in care will have contributed approximately £196,000 to their care to reach the cap.
If by contributing towards care costs, the value of a person’s remaining assets falls below £100,000, they are likely to be eligible for some financial support. Once the £86,000 cap is reached, Local Authorities will pay for all eligible personal care costs. No-one will need to make a contribution from their income towards these care costs. People may choose to “top up” their care costs by paying the difference towards a more expensive service, but this will not count towards the cap.
So, in summary while the care cap may reduce the amount you pay in the long term it is important to understand that there will still be costs associated with a relatives care that they and/or their family will need to fund.
For more information or guidance on how the cap care will affect you please speak to Chartered Financial Planner Sean McCabe. Mogers Drewett Financial Planning are specialist financial planners, accredited through the Society of Later Life Advisers, and we can provide advice and guidance regarding these new rules. Contact Sean today on 07739 344702 or sean.mccabe@mogersdrewett,.com.