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Tim’s response to the Care and Support Bill

The Government has finally confirmed their proposals to move forward the plan regarding adult social care and the funding thereof (the Care and Support Bill).

This has been long awaited and little has changed despite four major reports.  We have had the Royal Commission in 1999, a second Royal Commission in 2003, Andy Burnham’s ‘Green Paper’ in 2009 and Andrew Dilnot’s report in 2011. As always, the devil will be in the detail and we have yet to see the detailed proposal.

There are two figures from the recent announcement which are attracting all the headlines, £75,000 and £123,000.  These need to be considered in detail.

There is to be a cap on the cost of personal care set at £75,000 from 2017.

What does this mean?  The cap is only on the cost of personal care and not the cost of being in a care home. If we take a care home with fees of £800 per week,   the cost of providing personal care may be only £450 per week and therefore the costs for accommodation and food (hotel costs) would be £350 per week. The cap of £75,000 (which only applies to the £450 per week element) will be reached in 167 weeks (3 years 3 months).  The Local Authority should then support the funding of the personal care but the ongoing ‘hotel’ costs would still remain the responsibility of the person in care should assets remain above £123,000.

The Local Authority could be paying something if assets are below £123,000, but on the other hand they might not!!

This is because the means test includes income as well as capital.  The figure of £123,000 is only the upper limit for Local Authority funding.  There remains a lower limit (proposed to be £17,500).  Tariff income is expected to be calculated on any capital between the two.  Currently for every £250 of capital, £1 per week income will be deemed to be received.  So if someone owns exactly £123,000 of capital they would be deemed to receive an additional £422 per week of additional income.  This could bring total income above the Local Authority rates once the income from the state pension is included. If this were the case under the current system, no funding would be offered.

The detail of what the Local Authority could pay is going to be crucial.  Currently there is a postcode lottery where the maximum amount paid by the Local Authority varies according to which Local Authority you live in.  It is hoped that the figure will become consistent throughout England to help with clarity.

If the national Local Authority funding figure is set at, say, £520 per week and an individual has assets of £123,000, and receives the state pension, the Local Authority may not fund the individual as their income plus the tariff income would exceed the Local Authority weekly rate.

Full help is only going to be available to those with capital below the £17,500 threshold and partial help may be available for those with assets below £123,000.

There will be a cost to the Government because of the limiting of personal care cost, but this is not expected to kick in until at least 2020.  There have been a number of considerations as to how to fund the increased cost.  One method of funding has been linked to keeping nil rate band at £325,000 for three more years (until 2018) but there are other areas of reducing expenditure and increasing revenue being considered.

Keep an eye out for the means testing of TV licences for the elderly.  It has been suggested that only those over 65 and in receipt of pension credit should receive a free TV licence.  Other considerations have been a payment of National Insurance contributions by those of state pension age who are in gainful employment and also the taxing of the Pension Commencement Lump Sum (previously known as tax free cash) when pensions are crystallised.

Other changes to come in are regarding the deferred payment scheme. This is where the Local Authority currently offers the facility to pay for care when an individual has assets in excess of the threshold but the assets are tied up in a property.  All payments are currently treated as an interest free loan but it is expected that these loan payments will soon be subject to interest being charged.

The main points to be aware of from this blog are:

    Be careful as to how the politicians present this legislation, it is still going to mean families may need to sell the family home
    Funding of by the Local Authority individuals will probably not start at £123,
    The £75,000 cap is not the total for the cost of a care home, but the total for the cost of personal care
    Tariff income may mean disappointment when applying for Local Authority funding
    People in care now should not wait for the new legislation to commence.

As there is going to be conflicting information, clear concise and specialised advice is necessary when considering paying for care.  Speak to a suitably qualified financial adviser!

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