The lifetime cap on residential care costs is not all it seems

September 28th, 2013

Understandably, there is widespread confusion around how the cap on care costs works. You might be forgiven for believing that once you have spent £72,000 on care that the local authority would foot the bill for any further costs.

The reality is somewhat different as the cap relates only to care costs and not to general living costs (e.g. accommodation, food and other ‘hotel’ type costs necessary to live in comfort). Removing these costs significantly reduces the probability of reaching the cap. A recent survey by Saga highlighted that 69% of people thought that accommodation costs would count towards the cap.

Furthermore the cap only relates to the local authority’s rate rather than the full cost of care. If you cannot find a nursing home which will provide care at the local authority rate or you choose a more expensive home then you would have to ‘top up’ the difference. As many people in care will find themselves paying in excess of the local authority rate they will therefore still need to budget for considerable care costs.

Means-tested thresholds

Currently anyone with assets exceeding £23,250 will not receive any local authority assistance towards the cost of their needs and are expected to meet these costs themselves.

From 2016 financial support for care home costs will be available to an individual if they have assets of less than £118,000. Where the value of a home is not counted the Government intends to provide assistance to anyone with assets below £27,000.

Where a person has assets which exceed £17,000 but are less than £118,000 (or less than £27,000 where a property is not included in the assessment) they will be expected to contribute all their income towards the cost of their care. They will also be required to make a contribution from their assets above £17,000 which will be calculated by reference to a fixed formula.

In both the above scenarios individuals receiving residential care will remain responsible for their daily living costs if they can afford to pay them. This will be set at a standard amount of around £12,000 per annum.

Summary

Whilst the reforms are to be welcomed it is unfortunate that the original proposals put forward by the Dilnot commission have not been carried forward un-amended. In addition the fact that the majority of people will still find themselves above even the increased threshold for means-testing and the fact that the cap excludes general living costs will mean the ‘true’ cap will be considerably higher.

It is therefore still essential to put a financial plan in place to meet potential long term care costs in the future as the level at which the cap has been set will mean that only a relatively small percentage of people will receive financial support as a result. Please feel free to contact us for further guidance or for advice on any of the issues raised in this article.