Many people will still rack up sizeable costs when it comes to paying for social care, experts say, despite government pledges to protect families from “potentially catastrophic” bills.
Ministers last week announced a huge shake-up of adult social care and how it is funded – but, as with many financial deals, there is plenty of small print that could catch out the unwary, and detail yet to be published.
One key announcement was that from October 2023 no one in England would pay more than £86,000 for the care they require in their lifetime.
While the government has pointed out that under the new rules, some people could see the amount they have to pay cut by £100,000 or more, it was less keen to clearly spell out that “daily living costs” in a care home – accommodation, food and so on – would not count towards the new lifetime cap.
“Board and lodging” costs would easily be one third of the total bill, says former pensions minister Steve Webb, now a partner at actuaries LCP.
With the average cost of a residential care home for an older person estimated at £35,000-plus a year, that could mean a £12,000-a-year bill for living costs, and a lot more in some cases. For a nursing home, the total average cost is significantly higher – just over £48,000 a year.
Ros Altmann, another former pensions minister, told the Observer that by the time they reached the £86,000 cap, some people would probably have spent £150,000 or more.
It’s also important to note that, with living costs excluded, it would take a typical care home resident a little over three and a half years to hit the cap. Unfortunately, a significant number would not make it to that point because they would die before then.
Webb reckons the new lifetime cap will “benefit very few people for many years to come”. He adds: “No money which people have spent to date, or spend before October 2023, is expected to count. The clock will start at zero in October 2023.”
Webb and Altmann were more positive about another planned change. Currently in England, if someone has assets worth more than £23,250, they are responsible for the full cost of their care in a care home, with no cap on costs. Under the new system, anyone with assets below £20,000 won’t have to make any contribution from their savings or the value of their home. Those with assets from £20,000 to £100,000 will be eligible for some means-tested support. Those with assets above £100,000 must meet all fees until their assets fall below £100,000.
So how might it all work in practice? The government has given the case study example of “Yusuf” in his late 70s, who has lived on his own since his wife died 10 years ago. When she died, he downsized from their family home to a smaller property worth £180,000. As a result, he has £70,000 in savings. Yusuf develops dementia, can no longer cope at home and needs to move into residential care. He ultimately spends eight years living at the home. Yusuf’s care home costs £700 per week, or £36,400 a year.
Officials say that under the current system, over that eight years, Yusuf would spend a total of just over £290,000 on his care from his assets and his income (he has a pension of £210 a week), and as a result would only have £72,000 left in assets.
Under the new regime, the government claims Yusuf would end up spending £123,000 less than under the current system. He would hit the £86,000 cap after three years and four months, and so would no longer need to contribute for his personal care from his assets or his income after that. Beyond this, he would only have to pay towards his daily living costs. He is now left with £173,000, which is 69% of his original £250,000 assets.
In response to this official case study, Webb says that eight years living in residential care “would be at the upper end, I would have thought – I think something closer to three would be more typical”.
He adds: “Although it’s true that with £70,000 in savings, he would currently get zero help, because of the £23,250 capital cut-off, in the new world he still racks up substantial bills until he hits the cap.”
