BETRAYAL OF THE PRUDENT CLASSES
New rule means more families will have to sell home to fund care
MILLIONS of middle- class savers face raiding their nest eggs to avoid selling their house to pay for care.
Families who have scrimped and saved for a comfortable retirement fear they will not now be able to apply for council-run schemes that allow those in care to put off selling their home until after they have died.
This is because these plans — known as universal deferred payment — which were originally supposed to be available for all under a major upheaval to the care funding system, can now only be used by those with less than £23,250 in savings and investments.
It could mean those with investments that provide them with an income in retirement could be forced to run all these down and reduce the sums they live off — or be faced with selling the home they raised their family in.
The universal deferred payments scheme emerged out of the Dilnot Commission in 2012, which itself led to the 2014 Care Act. It came up with the idea of everybody being able to delay selling their house.
Every year, roughly 160,000 people need to go into care homes, and close to half — some 70,000 — pay their own fees, according to research by analyst Laing Buisson. These are known as ‘self funders’.
The average weekly cost of care home fees is £540. That works out as £2,340 a month — or £28,080 a year. Finding such sizeable sums at short notice can be crippling to family finances.
How much each individual must pay towards the cost of care is meanstested. This includes any property, savings and investments.
Property can be excluded from the council’s calculations, but there is a condition: a spouse or a dependant must be living in it. This means the issue of care-fee costs usually becomes much more pressing after the death of one parent.
If the surviving partner suddenly needs to go into care, the home can be immediately assessed for care fees eligibility.
This is where the Dilnot recommendation for universal deferred payment originally came into its own. In practice, it meant the council met the short-term care costs of the homeowner — and in return took a legal charge on the property with interest at roughly 2.5 pc.
After death, the home is sold off and all bills met from the proceeds. It would mean the end of any need to sell a person’s home while they were alive.
Until April 5, the decision to offer such a scheme has been at the discretion of the local authority, and anyone could apply.
But now, the new rules will see all councils forced to make such a scheme available. Interest will also be charged from the start of the care home stay.
Originally, it had been promised that all families would qualify.
But an amendment in the bill’s small-print has emerged: only those with less than £23,250 in savings and investments (not including your main house) would be eligible. This leaves millions of prudent families who have saved for decades with little option but to either sell their property or run down their nest eggs to qualify for the deferred scheme. In an impassioned House of Lords debate last December, Lord Lipsey spelled out its impact for middle- income families. ‘ Take a family of fairly modest means with £75,000 in nonhousing assets. ‘ The Government expects them to run down those assets until they have got just £23,250 in the bank. This would pay £500 a year in interest, if they were lucky.
‘It is not enough to cushion them from the uncertainties of life, not enough for presents for the children and so on. Nobody of modest means will take advantage of that scheme and run their savings down to £23,250.’
Janet Davies, of Symponia, a professional body for care home fee advisers, says: ‘The changes aren’t necessarily for the better. As with every aspect of care-fees planning, before people decide to settle on this route, they should explore all their other options.’
Research from Bupa warns that too many people approach retirement without planning how to pay for care.
Almost half of those aged 65 or over simply believe any care they end up needing in old age will be funded by the NHS or the local authority, it found.
And one in four had no idea at all of how it might be funded.
A Department of Health spokesman says: ‘The current system exposes people of modest wealth to the risk of losing up to 80 pc of their assets in a time of crisis to pay for care, with some people being forced to sell their homes.
‘Our package of reforms will help stop this from happening. Deferred payment agreements will protect people from having to sell their home in their lifetime to pay for care and the eligibility criteria will ensure those most at risk will be protected.’