Making provisions for later life is becoming more important as state intervention becomes less generous. The confusion around how to proceed with funding long-term care and making up any shortfalls means this is an area where advisers can provide a particularly essential service.
Age UK’s Care in Crisis report, published earlier this year, showed a simultaneous increase in demand for long-term care, and reduction in its funding. But the number of people aged 85 and over increased by 30 per cent between 2005 and 2014. The report found that from 2010/11 to 2013/14, public funding for social care for older people decreased by 10 per cent in real terms.
In addition, the number of older people receiving local authority-supported care services has dropped significantly: 35 per cent of councils reduced the number of older people using their services by more than 40 per cent between 2005/6 and 2012/13.
This means older people are very much on their own when it comes to care, and must be able to make their own provisions. A lack of clarity and public understanding of what the government will provide can trap people in a false sense of security, and the belief that they will not be liable to pay astronomical care fees. The reality is quite different, and individuals will need to be prepared to pay for residential or domiciliary care, and probably for a number of years.
The Dilnot review
In July 2011, economist Andrew Dilnot led the government-commissioned review of care fees. His report advocated a ‘limited liability’ model of social insurance where the richest essentially pay the ‘excess’. He proposed capping an individual’s lifetime contributions towards their care costs somewhere between £25,000 and £50,000. Instead the government will implement a cap of £72,000 in 2016.
Many individuals are comforted by the presence of a cap, although the numbers show this will be less helpful than they hope. The £72,000 cap applies to the cost of care that someone receives either in their own home, or living in a care home. The cap will not apply to someone’s bed and board if they are living in a care home, and these are charged separately even after hitting the £72,000 limit.
Costs of bed and board, also known as ‘hotel costs’, will be capped at £12,000 for everyone.
