Personal Pension  

Who will pay for aged care?


    Newspaper headlines suggest that many industries are facing a ‘timebomb’.

    However, even a ‘back of a vape packet’ calculation suggests that the care industry may well be correct when it suggests that the UK is facing significant issues when it comes to paying for care.

    With an estimated 433,000 adults living in residential care settings across the UK, as well as over-65s making up an increasing proportion of the population, the number of people needing this type of support is only likely to grow.

    Article continues after advert

    However, residential care is not inexpensive with a typical home in England costing annually approximately £29,558 – ranging from £34,788 in the South East to £24,492 in the North West. This is in addition to the cost of nursing care, which can cost far more.

    So who pays these costs? This has always been a challenge to communicate as not only do 72 per cent of over-45s believe that they are unlikely to need care in later life but 30 per cent believe the State will fund care if they need it.

    With the number of over-65s due to make up 25 per cent of the UK population by 2046 , this is simply not achievable. In 2014, the Coalition Government passed the Care Act which was designed to create an equitable standardised system easier to navigate and ultimately to use.

    In April 2015, the first tranche of the Care Act was introduced. However, the second tranche – which is the most interesting from a funding point of view as it would have introduced the ‘care cap’ in April 2016 – has been delayed until 2020.

    The care cap would have seen qualifying people (with assets below £118,000) receiving some local authority support with the theory that people would not have to spend more than £72,000 on the cost of social care during their lifetime.

    This point has been extensively debated given the fact that not all costs were included in the calculation and someone in England could conceivably spend £177,500 before hitting the cap. However, this approach did provide some modicum of protection from catastrophic costs, unlike the current system.

    Daily living

    Currently, people in England are assessed by their local council to ascertain how many ‘activities of daily living’ they can undertake and then they are required to pay for care until their assets reduce to £23,250 (limits in Scotland, Wales and Northern Ireland vary).

    When this limit is hit, they then receive some state funding until they reach the lower limit of £14,250 when the local authority is required to fund their care completely.

    It is important to note that the person must be assessed to have ‘severe/critical needs’ in order to qualify for local authority funding support so a relatively healthy 75-year old who has depleted their assets would not necessarily receive support.