Warning of care fee discrepancy for self-funders

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Warning of care fee discrepancy for self-funders

Pension provider Just Group called for urgent social care reforms to tackle the 'unfairness' faced by consumers footing their own care home bills.

Analysis from the provider, published yesterday (September 2), found the average annual care home fee for self-funders totalled £44,252, 43 per cent more than the £31,720 paid by local councils. 

In the south east, fee discrepancy was the highest with a difference of 52 per cent, with an average annual care home fee for self-funders of £55,276 compared with £36,972 for local councils.

Stephen Lowe, group communications director at Just Group, said: “These figures start to explain why people think care fees are unfair when those footing their own bill are charged many thousands of pounds a year more than another person who could be in the same home and receiving the same care but paid for by the local authority.”

Mr Lowe also said fees paid by councils were below what was needed for the running of care homes meaning care homes had to charge self-funders more to cover their costs.

Kelly Greig, partner and head of later life planning at Irwin Mitchell Private Wealth, said due to the fee discrepancy it was important that advisers helped their clients retain some of their assets to pay for care in later life.

Ms Greig said: “Local authorities have better buying power than individuals as they buy beds in bulk enabling them to negotiate a better deal than a self-funding individual.

“The worrying thing is that I talk to clients who want to get rid of all their assets so that they will not have to pay for their own social care in the future, but this means that they could end up in a less desirable care home than they may have envisaged.”

But, Jacqueline Berry, director at My Care Consultant, warned that relying on local authority funding and not saving for care costs in later life might result in individuals receiving a lower standard of care than they need.

Ms Berry said: "The problem with running out of money and falling back on local authority funding is that whilst you may be eligible for funding which you had not previously been entitled to, the local authority will only pay their set local authority rate, which is often below the level many care homes charge to self-funders.

"Also where a care home has no local authority places available or is a self-funder only residence, this means either family, friends or in some cases, a charitable organisation must fund the difference between the local authority rate and the fees that the care home charges (known as a ‘third party top up’).

"In the worst-case scenario, where such a top-up is not available, the person in care must move to another, potentially less salubrious care home which accepts the lower local authority rate." 

There is now an increased demand for advisers that understand the implications of social care funding on clients' pension funds, said Ms Berry.

She added: "Given the UK’s demographic changes and the increasing number of people requiring social care in later life, it’s critical that financial advisers develop an understanding of how financial planning and care advice interacts to ensure best consumer outcomes.

 "Advisers could adopt an ensemble approach to their financial planning, which would mean developing the appropriate soft skills and evolving in knowledge in respect of some of the growth advice areas like care, and working hand in hand with other specialists for specific matters."

Just called on prime minister Boris Johnson to publish the social care green paper as soon as possible after he indicated that there would be money for social care in Wednesday’s spending review.

In his leadership trail Mr Johnson said: “It is inequitable, some families having to raise hundreds of thousands in order to pay for the costs of care, others are getting those costs met, or at least partly met. There is a real sense of anxiety this is causing and we need to address it.”

But individuals are aware that social care funding is being put on the backburner, according to Mr Lowe.

He said: “The public isn’t fooled by promises and no action – more than half (52 per cent) agree that social care policy is being neglected because of Brexit.

“Brexit is undoubtedly a big issue but the parlous state of today’s social care system is letting everybody down – councils, care homes, care workers and of course the residents who are most vulnerable of all. 

“The promise of more funding is welcome but it doesn’t address the total absence of any long-term policy to address the fundamental problems within the social care system.”

The publication of the green paper was originally expected in summer 2018 but has faced several delays but the government has said it will be made public "in due course".

Several solutions for the care funding problem are said to be on the table, including the ‘Care Isa’ – a capped savings product, exempt from inheritance tax – and a 'care pension', which mixes drawdown and care insurance.

As part of the Centre for Policy Studies’ social care funding review, published on April 29, MP Damien Green suggested that people should be able to purchase a care supplement, which would be similar to an annuity or insurance policy, to ensure individuals have funds for more expensive care if needed in the future.

This money would come from individuals’ existing pension pots, lifetime savings or via equity withdrawal from people’s homes and would act as a top up to government funded state care.

amy.austin@ft.com

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