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The chaos within the government in recent years, along with a possible change in government this year, has meant any plan to fix the social care system in England looks, for the moment, to have been thrown into the long grass.
As a result and amid the cost of living crisis, advisers face challenges trying to help clients plan for the future.
Currently, if a person needs care, they can either directly buy the care they want from a provider – a care home or home care support services – or they can approach their local authority who will undertake a needs and a financial means test to see if they are eligible for public-funded care.
Under means-testing rules, if a person has assets or savings that exceed £23,250 they are not eligible for any state support.
Additionally, if they have between £14,250 and £23,250 of assets or savings, there is a sliding scale where they may be eligible for some funded care.
Below £14,250 they can access funding for all their care. These thresholds have not changed since 2010.
As Natasha Curry, deputy director of policy at health think tank Nuffield Trust, explains further, even if an individual falls below that lower threshold in terms of assets and savings, they may still have to contribute to their care costs from any income they earn.
In addition to the financial means test, they have to undergo a needs assessment. Councils have some discretion over how severe someone’s needs have to be before they fund care.
“So, even if you fall below the lower financial threshold, you may still not be eligible for care if your needs are deemed to be too low,” Curry adds.
“Councils are meant to fund people with moderate or severe needs, but what that means in reality is open to some interpretation. Furthermore, the council may agree to pay for all your care but define a package of care that is limited, so may leave the person with unmet needs.”
The detail of the cap design means that it would take a long time for people to benefit.
It is estimated that one in seven people face lifetime care costs in excess of £100,000. And there is currently no limit to the costs they could face over your lifetime.
The cost of care varies enormously by: setting – residential, at home or other; intensity of need; and by locality. Care costs are also affected by the supply of staff, providers and things like rurality, as well as how much funding a council can raise locally.
It also depends on who is paying; local authorities tend to pay lower rates than private individuals who self-fund – the difference can be 40 per cent.
Curry says: “This is because local authority budgets have been cut and they can’t pay providers the full cost of care, so providers often choose to pass those costs on to self-funders to stabilise their business.
“Average weekly cost of residential care for self-funders is £1,160 and for nursing care is £1,410. Home care will be dependent upon how many hours a person needs.”
As well as high costs, there are many other issues facing the social care system: there is a shortage of staff, so providers are finding it difficult to meet demand; there are long waits for local authority assessments; and financial uncertainty among councils mean that home care packages are often commissioned by the minute, so the quality and flexibility of care is variable.
Govt action – or inaction
The magnitude of the social care problem meant that many people were disappointed when the health and social care levy – a means to pay for reforms to the health and social care in England – was scrapped.
Another complexity to the social care system is that all the four countries of the UK do things differently.
The levy, which was established by the Health and Social Care Act, was first announced by ex-Prime Minister Boris Johnson in September 2021, when the government set out plans to reform adult social care in England.
It said that £5.4bn would be used to fund the reforms between 2022-23 and 2024-25:
- £3.6bn would be used to reform how people pay for social care (charging reforms). This included £1.4bn to help local authorities move towards paying a “fair cost of care” to providers.
- £1.7bn would be used to support wider system reform.
The funding was initially planned to come from the new levy – through an increase in national insurance contributions – but in September 2022 the then Liz Truss government announced the levy would be cancelled.
The then health secretary, Thérèse Coffey, however, said funding for social care would remain unchanged.
We have been calling on all political parties to be really clear in their manifestos about what they would do with social care. People deserve to know.
Under the now-delayed charging reforms, the government plans to introduce a new £86,000 cap on the amount anyone in England will have to spend on their personal care over their lifetime.
The cap will apply irrespective of a person’s age or income. The legislative framework for a cap is already provided by the Care Act 2014, but the relevant provisions are not currently in force.
Alongside the cap were plans to raise the lower means test threshold to £20,000 from £14,250 and the upper to £100,000 from £23,250.
Curry says: “This would make a tangible difference to more people immediately as more people would qualify for part-funding for care costs as their assets would fall below that threshold.”
While the reforms to health and social care were welcome, they were not without controversy.
Curry says: “The detail of the cap design means that it would take a long time for people to benefit – around three years for someone in a care home and six-plus years for someone with an average care package at home.
“It also does not include the costs of bed and board in residential care so you would still be liable to pay for 100 per cent of them.”
The government has said daily living costs would be set at a notional level of £200 per week at 2021-22 prices.
Jamie Jenkins, director of policy at Royal London, adds: “The overall framework made sense in that it targeted help for those most in need, and provided a cap on the catastrophic costs that could be incurred for someone needing care over the long term.
“However, the interaction with means-tested state benefits needed work, in order to avoid the situation where people were saving for care costs and simply losing that in benefits they would otherwise have received."
In the run-up to the general election, it is uncertain how committed the current government is to still keeping the cap. The Labour party’s intentions are also unclear.
Calling for clarity
Jenkins says the removal of the levy means there remains a real gap in the policy for funding social care, despite more than a decade of debate and a string of proposals.
He adds: “While it is still the intention for the care proposals to be introduced in 2025, it seems very likely that this will be reviewed if we see a change in government. It’s a big impact on advisers who want to help people manage their finances through later life.
“Financial advisers simply have to work within the rules as they stand, where most clients will need to consider the funding requirements of care for both themselves and their loved ones, in the absence of any cap on those costs.
“One of the things we have been doing is calling on all [political] parties to be really clear in their manifestos about what they would do with social care. People deserve to know.”
Aegon is another provider that has been calling on political parties to be clear on their plans for social care.
Everyone’s situation is different and a financial adviser that has a focus on care can be well placed to join the dots.
Steven Cameron, pensions director at Aegon, says: “This is something that affects most people, whether it's personally or whether it's through parents or grandparents. People deserve to know what any future government would do in terms of a deal on social care.
“It's a big impact for society and advisers. [IFAs], particularly those who advise in the retirement space, want to help people manage their finances through later life.
“At the moment, it's difficult for an adviser to advise [on care] with any certainty. Whereas if we had a deal in place...and if we had stability that future of governments wouldn't just changed the rules, you could start planning ahead, and I think that a lot of people would feel a lot of comfort.”
Cameron says introducing a cap on care costs will also enable providers and advisers to work together to come up with innovative propositions.
Advice is crucial
In the absence of clarity over the future of the care system, advisers have an even more critical role.
Mel Kenny, chartered financial planner at Radcliffe & Newlands, says: “What is important to make clear to those planning to avoid having to pay for their future care, is that they could be leaving themselves at the mercy of the local authority.
"In the absence of a third-party top-up, they risk their local authority funded care being far more undesirable than they could have ever imagined.
"For those closer to needing care, trying to understand the social care system in a crisis is a lot for a loved one to take on. Friends who have been in a similar position can be helpful. However, everyone’s situation is different and a financial adviser that has a focus on care can be well placed to join the dots."
It is not clear if or when the cap will come into effect.
Kenny adds: "The situation around care funding has not changed much since 2015. It has therefore been a stable environment to advise in, with the potential for reform always casting a doubt in clients' minds on whether an action now would also be the correct one under any proposed reform.
"However, a financial adviser can remove distractions from the situation and simply deal with what is known now, with a considered eye on foreseeable change."
This is not the first time plans for a cap have been delayed.
In 2014, a cap was passed into legislation but then delayed in 2016 and then abandoned in 2020.
Curry says: “It is not clear if or when the cap will come into effect. Councils need a lot of lead-in time to get ready to administer it and they will need to be reassured of sufficient funding.
“It’s not clear that will be in place. Also, the implementation date falls after the election, so there is a lot of uncertainty about it.”
Could insurance help?
The absence of a cap limits propositions providers can come up with.
Jenkins says: “In the absence of a cap, insurance products would likely remain prohibitively expensive unless they were taken out at an early age.
“Insurance could certainly play a role in funding care if a cap is introduced as it limits the liability for the insurer, making it more affordable for the consumer.”
Curry says: “Private insurance is not an option. It is not a viable market for insurers and, even with a cap, insurance companies have indicated it is not viable.”
Insurance arrangements that are put in place before the point of need are limited to some whole-of-life assurance plans that pay out a small percentage of the overall sum assured in the event of, for example, dementia.
Kenny says, while these help, they are not designed to meet the full need of paying for care.
He adds: “Solutions to meet the full cost of care shortfall and reduce the risk of an estate from being majorly impact by the cost of care, or worse still, running out of money, are met with an immediate needs annuity or deferred annuity.
“There are various ways the different insurers would deal with a cap coming in during the lifespan of current plans, with tailored new propositions ready to go if the cap does eventually come in."
Ima Jackson-Obot is deputy features editor of FT Adviser
