Long-term care costs

The Government has announced its proposals for funding long-term care.

Long-term care has been one of the topics which successive governments have pushed down the road with the help of enquiries, reviews and even a Royal Commission. The problem has always been the same: how to meet the cost for those who are not already funded by the state.

The Government has now published a policy statement, following up on a summer 2011 report it commissioned from a team headed by Andrew Dilnot. The framework – which is for England only – is far from generous. The headline-grabber is that there will be a cap on care costs to be met by an individual of £75,000 (index-linked). Alas, this is not as simple as it seems.

  • Care means just that – the so-called ‘hotel costs’ of accommodation and food will still have to be met personally, which the Government says will be around £12,000 a year in 2017/18, when the new regime is due to start.
  • The care cost that will be met is what a local authority would pay, based on an individual needs assessment. If you want better care/comfort than the local authority would buy, you will have to pay the excess and this will not count towards the £75,000 cap.
  • The means test ceiling, above which there is no initial state help, will rise from the current £23,250 to £123,000. The floor, at which all costs are met, will increase from £14,250 to £17,000. The jump in the ceiling means that many more people will receive some help with care costs, but there has been no change to the basis of contribution – £1 a week for each £250 above the lower threshold (equivalent to 20.8%). So, for example, if you have assets worth £100,000, initially you would be expected to pay £332 a week towards your care.

The Government estimates the yearly cost in 2020 at £1 billion, which it says will be funded by the savings from state pension reforms and extending the freeze on the inheritance tax nil rate band at £325,000 until 2018. So, even if you think you can now dispense with planning for long-term care, you may want to revisit your estate planning.

28th March 2013