What is the £86,000 care cap and will it help you? Here’s what you must know

November 2021

Accessing and paying for care have become big issues. As more people live longer, more people will inevitably need some level of support as they get older.

Yet one media report reveals that, between 2000 and 2019, up to 330,000 homes were sold by vulnerable pensioners to pay for their care, which included help getting dressed or to wash.

Now, the government has taken steps to fund social care and limit the cost to individuals. Read on to discover how the new care cap works and whether you might benefit from it.

Social care reform: A National Insurance hike and care cap

In September 2021, the government announced some key changes to social care and how it’s funded.

Among the changes is a National Insurance contributions (NICs) hike. NICs will increase by 1.25 percentage points from April 2022 to allow the government to invest more in health and care. From 2023, the Health and Social Care Levy will be a separate contribution.

The government estimates the new levy will lead to a record £36 billion being invested in the health and care system over the next three years. Some of this will go towards helping the NHS tackle Covid backlogs, as well as reforming adult social care.

Most individuals need to pay for at least a portion of their care costs should they need support. According to Which?, the average weekly cost of residential care was £681 in England in 2019/20. This figure increased to £979 a week if nursing care was required. Over a year, that would lead to bills of £35,412 and £50,908, respectively.

With this in mind, you too may be worried about having to sell your home to fund your care.

The good news is that the government has now introduced a care cap. From 2023, no one will pay more than £86,000 for the care they need for daily tasks. It said the reform will end “unpredictable and catastrophic care costs” to make the system fairer.

That said, the cap isn’t as straightforward as it seems.

What does the cap cover, and who will benefit?

Crucially, the cap will cover care costs only. It will not cover daily living costs, such as accommodation, energy bills, or food.

For care home residents, it can be difficult to understand how much of their current fees go towards care, as bills are not usually itemised. However, the Telegraph reports that a typical person in residential care costing £1,100 a week can expect just £350 of this to go towards care.

In this scenario, just £18,000 of a total £60,000 annual bill would contribute towards the cap. As a result, the person would only start to receive government support after five years, while during this time they would have spent £210,000 of their own money on non-care items.

In addition, few care home residents will survive long enough to reach the cap. As care is often a last resort or only used when an individual needs round-the-clock care, half of the people do not survive longer than a year after they move into a care home.

While the care cap could benefit you if you remain in care for several years, you will still need to be aware of how you’ll fund your non-care costs, whether from assets or income.

60% are considering an alternative to care homes

It’s not just the cost of care homes that worries people. Some 60% of UK adults, the equivalent of 31.6 million people, said they worry about moving into a care home after seeing how Covid-19 spread within them, according to an LV= survey. This number increased to 65% among the over-55s.

Around the same proportion (61%) said they’d prefer to stay in their own home.

While this can seem like a cheaper option, it does come with costs. You may need to adapt your home to make it suitable for your needs or have a carer visit regularly to lend support, even if family can help.

These costs can still add up to thousands of pounds every year, so it’s important to understand how you’d pay for them and the impact it could have on your income.

No one wants to think about becoming ill or needing more support in old age. But making a plan and setting aside some of your money to fund your care, if needed, could provide greater confidence in your future.

Being proactive can also mean you have more choices. For example, having your own care fund to draw on may mean you’re able to choose a care home that’s close to loved ones and has facilities you’ll enjoy.

Get in touch

If you want to discuss how you might use your assets to fund your care, contact your financial planner directly as they’ll be happy to help. Alternatively, contact us using the details below.

Please note:

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

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