Why you should still be worried about care fees

Older couple outdoors

Care home fees have been a huge concern historically. They can eat up everything you’ve worked so hard for, leaving very little to pass on to your children or grandchildren.

Current rules

Getting care and support assistance starts with a needs assessment. The assessment looks what needs you have and is used to decide whether your needs meet the eligibility criteria for care and support. If they do, the Local Authority may perform a ‘means test’ to see if you can afford to pay for care. This involves looking at both your income and assets/savings, although income from certain types of disability benefits is disregarded.

The family home

If you own your own home and certain people still live in that home, the home is disregarded in the calculation. Those people are:

  • your partner or former partner, unless they are estranged from you
  • your estranged or divorced partner IF they are also a lone parent
  • a relative who is aged 60 or over
  • a relative who is disabled
  • a child of yours aged under 18 (Age UK)

However, what often happens with couples is that the first-to-die leaves everything to their partner, so that the whole value of the home is taken into account (less any mortgage) when the survivor needs help.

Note that if you have long term complex needs, you may qualify for NHS Continuing Healthcare Funding which is not means tested. This can be rather difficult to secure.

Means testing

Under current rules, those with savings of more than £23,250 (including the family home) have to fund their own care. Once savings fall below the £23,250 threshold, the Local Authority will contribute towards the care costs, until a lower limit of £14,250 is reached. At that point the Local Authority will (in theory) take over paying for care – although you will have to continue using any income to pay for care that was included in your means test (such as pension payments). The Local Authority will only pay up to a certain amount – known as your ‘personal budget’ – and this may not cover the cost of providing the care you want (for example, a specific provider, home or type of room). In these cases a ‘top up’ fee will be charged by the provider. This can eat into the final £14,250 of savings, leaving nothing at all to pass on.

There are a few other points to mention. First, those paying for their own care are typically charged considerably more than those funded by the Local Authority. This can mean that savings can deplete very quickly. Second, the cost of care varies considerably from region to region, so the speed at which savings are diminished can depend where the person lives in the country!

What’s changing?

In September 2021 Boris Johnson announced that from October 2023, no-one will have to pay more than £86,000 for care over their lifetime as part of the government’s social care plan (known as the ‘care cap’). Comparing the old and new plans side-by-side:

Old rulesNew rules
You fund your care if you have assets of £23,250 or more (including your home, unless certain people are living in it, as above)You fund your care if you have assets of £100,000 or more (including your home, unless certain people are living in it, as above)
The Local Authority pays a contribution if you have assets from £14,250 – £23,250The Local Authority pays a contribution for personal care if you have assets from £20,000 – £100,000. You will not have to pay more than 20% of these assets each year towards personal care. You continue paying all daily living costs.
The Local Authority takes over paying for your care when your assets reach the lower limit of £14,250 (but only up to your ‘personal budget’ – you may have to pay top-up payments).The Local Authority takes over paying for your personal care when your assets reach the lower limit of £20,000 (but only up to your ‘personal budget’ – you may have to pay top-up payments). You continue paying all daily living costs.

The diagram below illustrates how care fees will be funded before and after reaching the cap.


Above source: Operational guidance to implement a lifetime cap on care costs

You will note the revelation that the cap is ONLY for the cost of ‘personal care’ and would NOT cover money spent on the daily living costs for people in care homes. Further, people would remain responsible for their daily living costs throughout their care journey, including after they reach the cap. Daily living costs include things such as rent, food and utility bills. Under the Government scheme, those costs are set at a national, notional amount, the equivalent of £200 per week in 2021 to 2022 prices.

Further, any top up payments also do not count towards the cap. As mentioned above, if the person chooses a preferred choice of accommodation or care arrangement, for example, secure a premium room or furnishings, and this results in a cost higher than the personal budget, those additional costs will be treated as top-up payments and will not count towards the cap. They will also still be payable by the person once the cap has been reached.

Where are we now?

These rules have not yet been enacted. The timeline so far is:

  • September 2021 – Boris Johnson announces new rules will apply from October 2023
  • 4th March 2022 – a consultation was launched on how this would work in practice – the closing date was 1 April 2022.
  • The government has responded to the first part of the consultation, ‘supporting local preparation’ but has not yet responded to the second part of the consultation, ‘implementing the cap on care costs’.

The draft operational guidance can be downloaded here.

What can be done?

Nothing is set in stone yet – the draft guidance could change, the proposals could be delayed or scrapped altogether.

However, if the new rules are implemented, I don’t think we can say with any certainty that if a couple own a £300,000 house, £128,000 of it will definitely be available to pass on to their children (after 2 x £86,000 has been deducted). This is the picture that I believe was painted initially when the ‘care cap’ announcement was made, but now we have more details it is clearly not accurate. It is likely that savings will be used up for ‘daily living costs’ and ‘top up payments’ that do not count towards the cap.

I would therefore recommend that you give thought to how you currently own your family home and how this is left in your Will. This has always been my advice under the current rules, and it won’t change if and when the new rules are enacted.

If a couple owns a home as joint tenants, the property is not held in shares as such. Both own 100%, so when one dies, the other continues to own the whole property, regardless of what their Will says. If instead the property is held as tenants in common, each person can deal with their own share and leave it as they wish in their Wills. If they leave use of their share to the survivor, rather than gifting it outright, it cannot be taken into account when the Local Authority performs a means test because the survivor does not own it. The first-to-die’s share of the property is also protected if the survivor should remarry or fall into debt.

Other assets can be left in the same way, although careful consideration should be given to whether the survivor will have sufficient funds to live on, including securing a good standard of quality care should they need it.

The key point here is that these changes need to be made while both of you are in good mental and physical health. This is not something exclusively for the elderly – it is planning that any adult should consider when making their Will.

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