Social care reform plans just muddy the waters

LAST week’s adult social care reforms were designed to bring clarity, certainty and fairness to the fraught issue of funding our final years, but the overhaul looks set to create as many problems as it solves.

While Prime Minister Boris Johnson deserves plaudits for attempting to solve the care conundrum rather than kicking it even further down the road, the result is even more uncertainty.

Many will be wondering how the reforms will affect their own later life planning. Unfortunately, there are still more questions than answers.

FALSE CAP

While the new £86,000 cap on social care costs is welcome, it is likely to prove of limited value in practice.

In 2010, the Dilnot Commission’s review of long-term care recommended a far lower cap of £35,000, and Shaun Moore, tax and financial planning expert at Quilter, said: “The new cap will still place a pretty sizeable burden on individuals to stump up huge costs for their care provision.” In practice, if somebody requires an extended stay in a nursing care home, the bill could still run to hundreds of thousands of pounds.

That is because the £86,000 cap only applies to personal care costs. It does not cover daily living costs such as food and accommodation, which can easily add up to £1,000 a month.

Just Group calculates it could take three or four years to hit the £86,000 personal care cap, with families spending £200,000 to £400,000 in total.worse, daily living costs will continue to roll up afterwards.

Every year, around 20,000 people have to sell their homes to meet care costs and Louise Higham, financial planning director at Tilney, said this is unlikely to change. “Families should not get drawn into a false sense of security that their care needs will be taken care of, and many will still have to sell homes to pay for care.”

She said families must draw up plans to plug any shortfall, by building up their savings pots. In practice, most won’t because of the uncertainty and complexity or plain lack of money.

FLOOR FLAW

The Government also lifted the “floor” at which point the local authority will pay for care costs.

Currently, it only makes a contribution once the person’s assets have fallen below £23,250 in England, and only cover the full cost after they have dwindled to just £14,250. From October 2023, these will be raised so that help becomes available once savings fall below £100,000, but local authorities will only meet the full costs once savings fall below a meagre £20,000.

Morgan Vine, head of policy and influencing at charity Independent Age, said we have no idea how much help local authorities will offer once savings fall below £100,000. “I still expect many needing care will still use up almost all of their savings and property wealth.”

YET MORE MUDDLE

Seven in 10 over-45s who have had to organise care for a family member said they found the care system very complex and were shocked at how much it costs, Just Group research shows. If anything, it is going to get more confusing, because local authorities will now have to track how much people are spending on personal care, in order to calculate the cap accurately.

As if that was not bad enough, people would only start accumulating funds in their care account from October 2023, meaning care spending before this point will not count. Mike Stimpson, partner at wealth manager Saltus, said we need more clarification on how the cap will be administered, tracked and recorded. “It is quite likely that local councils will not fund private, more expensive care homes once people hit the cap, possibly forcing people to move care home.”

If Stimpson is right, that will cause yet more uncertainty and worry among vulnerable older people, who will fear being forced to move to an approved local authority home once the money runs out.

‘It is quite likely the Government

will not fund private, more expensive care

homes once people hit cap’

UNFAIR PLANS?

Many were critical about the way the Government is funding extra NHS and social care spending, with a new 1.25 per cent health and social care National Insurance levy.

Jonathan Yeomans, head of tax at personal tax app Untied, said this will hit younger, lower-paid workers hardest.while pensioners will now pay the levy on earned income, they escape NI altogether on occupational and state pension income. “Many younger taxpayers now being hit by this charge would consider this unfair,” Yeomans said.

The big danger is that social care is setting the generations against each other. Older people are unhappy because they feel after decades of making NI contributions they aren’t getting the care they deserve.

Young people complain because they are paying tax to give older people a better chance of holding on to their homes.

The issue is only going to get more acute, said Jane Williams, director and head of client services at Curamcare, who notes that 5,200 new people need care every day and the annual £40billion social care bill will increase by £1billion every year. “It is no wonder the Government delayed its care plans.the risk of throwing good money after bad is high.”