The government has made some radical changes to the social care system in a bid to fix a sector that has been broken for many years.
You will only pay up to £86,000 towards a person’s social care before the state takes over the costs. The introduction of this cap is the most radical change in the reform package, meaning that people will not pay more than £86,000 in social care fees, but do the changes go far enough to ease the financial burden on those affected across the United Kingdom?
Upper Cap Limit
In the current regime, a person would foot the bill for all social care costs unless they have less than £23,250 in assets. Having less than that amount in assets would make somebody eligible for support from local authorities, lessening the financial burden of the payer.
The government has now raised the Upper Cap Limit to £100,000 in total asset cost. Somebody with £100,000 or less in total assets would never contribute more than 20% of this amount on a yearly basis. This is a substantial increase on the previous of almost £80,000.
Lower Cap Limit
If a person owns £100,000 worth of assets then they will be left with £20,000. It does not drop to £14,000 because the lower-cap limit has risen from £14,250 to £20,000. Anything less than £20,000 will be entirely funded by the state.
Currently, a person would see their social care bills entirely picked up by the state if they had less than £14,250 in assets. The reform would increase that limit by £5,750.
How this affects you
The £86,000 amount is a big one and it could still lead to a lot of struggle from those on the breadline. While people of significant wealth might be able to put together £86,000, those in working-class areas are unlikely to be able to make these payments without having to sell their home.
Though the scheme was designed to prevent this from happening, it is quite clear that many will still be forced into selling their home in order to raise that kind of money.
More problematic is that somebody with a low house value will have very little left over to downsize.
One other route people could go down is that of equity release. You should always try to downsize first but, sometimes, that solution is simply not possible. Equity release is where you essentially release money from the value of your home but you will have to pay that back over time.
Money expert Martin Lewis urges caution, however. He writes: “When weighing up which equity release product would suit you best, remember that the eye-watering price-tag your estate would have to repay comes if you’ve chosen not to make monthly repayments to reduce the debt, so the interest compounds and compounds.
“For example, borrow £20,000 aged 60 at 5.1% on a £120,000 home, and the amount you owe doubles roughly every 14 years. So live until 74 and you owe around £40,000, live until 88 and you owe £80,000.”
“As well as the actual cost of the interest, you’ll have to pay a number of fees. This will likely set you back between £1,500 and £3,000, depending on the type of plan being arranged, and will include arrangement & valuation costs, as well as fees for legal work and a surveyor.”
On the other hand, If somebody who is middle-class had a house worth £320,000 then they can sell the house and downsize with a budget of nearly £250,000 to play with – after social care costs have been paid. Equally, a millionaire can probably avoid having to sell their house as they might be able to find other assets that can equate to the £86,000 cost.
Everything about the reform is better than the previous system. There is more flexibility with the new changes. People will not be left with the burden of continually paying social care costs until the very end – there is now a cap in place.
However, these changes do not put the issues of social care to bed. Those on the breadline will still suffer because the benefactors appear to be the middle-class and those with excess wealth. The poor will still be the ones who are hit the hardest.