The social care cap and what it means for you
Chris Broome – Chartered Financial Planner
Next year, Boris Johnson’s social care cap will be introduced. So, what is it and what does it mean for you?
The social care cap limits how much an individual will pay for care during their lifetime. It will start in October 2023. The cap is £86,000, but it may not be as generous as it first seems.
The cost of care and the financial decisions someone must make if they or a loved one requires care have been debated, especially as more people are requiring care later in life.
The cost of care varies hugely between locations and the type of care needed. However, according to carehome.co.uk the average cost of living in a residential care home is £704 a week, adding up to £36,608 a year. If nursing care is needed, this rises to £888 a week, or £46,176 a year.
As a result, it’s not surprising that many people are worried about how they will pay for care if they need it and the decisions they’d need to make to fund it.
While a local authority may pay for some or all of care costs, this is means-tested, and most people will need to pay for at least a portion of their care bill. It can mean some people needing to use care facilities are forced to sell their homes or deplete the assets they’d worked hard to secure.
“Daily living costs” are not covered by the care cap
The social care cap will only cover the costs of care. It will not include “daily living costs”. This means care home residents will still be liable for costs such as rent, utility bills, and catering even after they reach the social care cap threshold.
The average daily living costs of a care home resident is difficult to assess. At the moment, many care homes do not itemise bills.
The exclusion of living expenses means it’s still important for people to consider care costs beyond the £86,000 cap.
The distinction between costs has led to criticism of the cap. It’s also received criticism for other reasons, including:
- The cap remaining the same for everyone. Individuals with total assets with a lower value could lose more of their estate, as a percentage, than wealthier individuals.
- Not tackling the issue of what is classified as “social care” rather than “healthcare”. Dementia sufferers, for instance, will often face higher care costs because the support needed typically comes under “social care” rather than “healthcare”.
If the value of your assets exceeds £100,000, you will need to pay for the cost of care
Whether or not you have to contribute to care costs depends on the total value of your assets, this may include things like your savings, property, and investments.
Under the new rules, people with assets under £20,000 will not have to deplete their assets to pay for care. However, they may have to make contributions from their income depending on how much it is.
If the value of your assets is between £20,000 and £100,000 you may get help from your local authority to pay for care costs, this will be dependent on your income and assets.
If your assets are more than £100,000, you will need to pay for all the care costs until the value falls below this threshold.
There are different savings and asset thresholds in Scotland and Wales.
So, once you consider the value of your property and other assets, it’s likely you would need to pay for care until the cap is reached, and then continue to pay for daily living costs.
It’s important to make potential care costs part of your long-term plan
No one wants to think about needing to use care services later in life. However, making potential costs part of your long-term plan can provide you with security.
Not only does it mean you have a fund to use if it’s needed, but it can also provide you with more choice if care is required. It may mean you’re able to choose a facility that offers the services you want or a residential care home that’s closer to your family and friends.
We can help you put a financial plan in place that will help you reach your goals and provide you with security when things don’t go to plan. Please contact us to talk about care and the steps you can take to create a care fund.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.