What will the social care cost cap mean for you and your family?

In early 2021 we saw the next step in the UK government’s plans to reform social care. And since our November post around means-testing for social care provisions, further detail has been revealed around how the social care cost cap will work in practice.

Currently, one in ten of those aged 65 in England are likely to be hit with social care costs of £100,000 or more during their lifetime. But September brought the Prime Minister’s announcement that from 2023, the government propose a social care cost cap of £86,000.

The effect of the social care cost cap

This is great news for some, as it addresses the highly emotive matter of potentially losing their home and all their savings, where the financial burden of social care falls to them.

But is anything in life as simple and straightforward as we hope? Sadly not. And the same could be said in this case.

In fact, although on first glance the social care cost cap would have been deemed to help the less well-off, unfortunately not so to the same degree as it does the wealthier amongst the ageing population.

The proposal, due to come into effect in England from 2023 (Scotland, Wales and Northern Ireland have their own social care funding policies), is based on two key principles:

• Anyone owning assets over the new £100,000 upper capital limit will only be required to spend £86,000 of that on social care costs. This is the new social care cost cap.
• Local authorities will cover any additional social care costs, which means an increase from the current £23,250 to £100,000 (upper limit) and the lower limit (care costs covered in full by your local authority) would rise from £14,250 to £20,000.

And the downside?

• The social care cost cap only applies to personal care costs. So, income and savings, if necessary, will be required to pay for food and accommodation (classed as non-care costs). Although these costs will be assumed to be, and capped at, £200 a week for care home residents, and normally must be met by the resident, they are not included within contributions to the social care cost cap.
• Any top-up fees paid for superior care facilities are not accounted for. The cap is calculated on standard local authority care costs.
• And although initial expectations were that the social care cost cap would incorporate the total care cost i.e., the cost paid by the individual and the local authority, it has been based only on care payments made by the individual.

This means those with capital of £106,000 or above could find themselves paying up to the cap to meet care costs. The risk for those with less than that is they will still have to pay until the £20,000 lower capital threshold is reached. Hence the opposition to the proposal, as the less wealthy will have to utilise a higher proportion of their wealth and assets than the those who are better off financially.

Each individual’s social care financial plan will be determined by their local authority. They will calculate when the social care cost cap will be reached, and from what point the individual’s personal contribution to their social care is no longer required.

Will we see geographical implications of the social care cost cap?

 
Even with the £5.4bn in additional Treasury funding over the next few years, unfortunately, this proposal still creates a number of geographical implications.

Firstly, the charity Age UK have stated the practical implications for older people will be those with lower-value homes and little or no savings, will struggle to pass on any inheritance to their loved ones, as such a “high proportion of their assets will be used to fund their care.”

Similarly, Sir Andrew Dilnot, who led the last social care funding review a decade ago, commented that there is a ‘sort of north-south axis’ in that people living in the north and other areas where house prices are lowest are ‘likely to be hit harder’ on average by this social care cost cap proposal.

One slight ‘green shoot’ within the latest update was an additional announcement of a new Health and Social Care Levy coming into effect from April 2022, which will effectively add 1.25 percentage points to National Insurance Contributions of employers, employees, and the self-employed.

How can I prepare for mine and my family’s care costs?

With all this in mind, the social care cost cap is a stark reminder that the potential cost of care should still be considered within your retirement plans. 

Here at Simpson Financial Services, our team of Independent Financial Advisors have access to a vast range of products. So, as experts in the financial markets, we not only consider your retirement and pension planning, but we can also bring savings and investments*, mortgage products and estate planning into the equation for you at the same time.

We are here to answer any queries you may have and help reduce your concerns right away around the social care cost cap. Contact us today to discuss your individual needs and be ahead of the game when it comes to considering yours or your family's financial prospects for the future.

(*The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance).