The industry has responded with concern over the government's plans to exclude both the financial help people get to cover their care, and living costs, from the new cap on costs.
In a document published yesterday (November 17), the government said the benefits people use to help pay for care will be excluded from its incoming cap on care costs, which the industry has said will hit the poorest savers the hardest.
When it introduced the health and social care levy earlier this year the government said that from October 2023 no-one would pay more than £86,000 for care.
But it has now set out that ‘personal care costs’ refers only to the “components of any care package considered to be related to personal care”.
As well as benefits being excluded, the cap will not cover daily living costs such as rent, food and utility bills, and this will apply equally to those in a care home as well as those living in their own home.
Only the money a local authority assesses a person as needing to spend on care will count towards the cap.
People will have to pay living costs, set at £200 a week, for life or until their assets are eroded far enough to qualify for help.
For example, if an individual is paying a total of £700 per week to a care home, £200 of this will be deemed daily living costs and the remaining £500 care. Only the £500 per week will count towards the £86,000 cap.
To help more people with the cost of their care, the government is also increasing the point at which a person is eligible for local authority means-tested support.
From October 2023 the upper capital limit will rise to £100,000 from the current £23,250 and the lower capital limit will increase to £20,000 from £14,250.
Anyone above the upper limit will be expected to pay for their care themselves whereas people below the lower threshold will only contribute as much as they can afford.
But this will not count towards the cap, so those with assets below £100,000 could end up paying more than someone who has more savings but would hit the cap sooner.
Reforms face backlash
The government’s plans have not gone down well with MPs and the industry.
Shadow social care minister Liz Kendall accused the government of sneaking out the changes.
In a tweet yesterday she said: “Boris Johnson promised no one would have to sell their home to pay for their care.
“Now we know if you’re rich, you won’t see your life savings wiped out but if you’ve got low or modest savings, you will.
“It’s unfair and it’s wrong. Britain deserves better.”
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said the changes mean that a lot more people will be paying far more towards the cost of care than they may have expected.
Morrisey said: “Not everything you spend on care counts towards the cap, and even when you reach it, you may still need to keep paying for your care.
“In particular, this is a real blow for people with less income and savings, who will now have to spend far more of it on care before they reach the care cap, because any benefits they put towards the cost of care won’t be counted.
“There’s also bad news for those who want a higher level of care, because the local authority will assess how much care you need, and only this spending will count towards the cap. If you pay for additional care to make life less difficult, such as longer visits in your home, or amenities in your care home room, none of this will count towards the care cap.”
But Steven Cameron, pensions director at Aegon, welcomed the clarity from the government.
“The government has now proposed a national notional charge for room and board, or daily living costs of £200 per week,” Cameron said. “This gives more clarity around this element of possible future costs.”
He added: "£200 per week for room and board may look proportionately low and some might have expected it to be set higher. But by setting it low, the government is counting more as care which will mean individuals reach the £86,000 cap and stop paying for care sooner."
MPs are due to vote on this next week.
amy.austin@ft.com
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