The government has consistently stated that "no one should have to sell their home to pay for their care". In consequence, this reform predominantly focuses on the political aspect of financing care reform, with changes being made to the way in which individual’s contribution to their care costs will be calculated.
The headline news is that a person’s contribution to the cost of their care will be capped at £86,000 from October 2023. There are also changes to the amount a person can have in assets before they have to contribute to their care costs.
The limit below which you make no contribution will rise from £14,250 to £20,000 and the amount after which a person has to pay all of their care costs rises from £23,250 to £100,000 (partial contributions will apply to the amount in between these figures).
All of this seems, at first sight, to be very good news and in some ways it is, but as always the devil is indeed in the detail, much of which has not yet been disclosed.
Not-so-radical plans
There are aspects of this reform that make it less of a radical change than it at first appears.
Importantly, the £86,000 only applies to the actual costs of 'personal care’ itself. For residential care, fees include both this personal care element and the accommodation costs. Currently these are not split out as separate costs.
Many clients will therefore be paying a lot more than £86,000 before the cap is reached as they will continue to pay the accommodation costs and these will not be included in their cap.
Exact details of the costings split are not available yet, but residents may well have to pay more than double the £86,000 cap before the local authority steps in. The regulations around this are still to be consulted on.
Of equal importance is the fact that the cap will only apply to ‘eligible needs', as local authority funding already does now.
This means that not all care costs will count towards this £86,000, but only those a local authority has assessed your client as needing.
A criticism of the eligibility criteria is that the bar is set very high and there is significant unmet need among people needing care.
In February 2020, Age UK identified that 23 per cent of care requests were rejected on the grounds that the applicant failed to meet the eligibility criteria – equivalent of 80 people per hour.
That is not to say that the reforms are not welcome, but rather that advisers will best help their clients by guiding them beyond the political headlines into the reality of how many of them will need much more money than £86,000, and many will indeed have to sell their homes or use the local authority deferred payment scheme to defer the costs until after the death of the resident.
If leaving the home as an inheritance is their priority, this new reform will not wave a magic wand for everyone.
Catastrophic costs
Nevertheless the reform does help to end the unfairness of catastrophic loss that is open ended.
This removes the anxiety and the indignity of worrying about whether you, or a family member, will outlive your money, with all the implications for negative changes to lifestyle this brings.
It is to be remembered that this reform does not change the need to contribute income. It only refers to assets. However, there is a pledge to unfreeze the minimum income guarantee for those receiving care in their own home and the personal expenditure allowance for care-home residents so that from April 2022 these will both rise with inflation.
Finally, the reforms have attracted controversy by the funding mechanism including a rise in national insurance contributions of 1.25 percentage points from April 2022, ringfenced for health and social care reform. This will become a levy from April 2023.
Doubtless the discussion around the intergenerational fairness of this and whether the new levy is the right funding mechanism will continue.
So too will the important point that social care appears to continue to be the poor relation of NHS care and these new proposals do little to change this view, especially as they fail to provide any immediate support for the social care sector, which is widely acknowledged to be at breaking point.
Nevertheless, none of these debates should distract advisers from the core messages they can help to communicate to clients.
The direction of travel of the government in relation to care funding is now much clearer, even if the details are not. An end to the worry around catastrophic, unlimited financial loss is crucial in client discussions around later life planning and the financial options available to them to meet their specific needs and objectives.
While there will continue to be a much needed spotlight shone on the issue of care funding, the key message for advisers is that clients will continue to need help to navigate the complexities of the care system.
The headline news implies that contributing now will mean future care costs are taken care of after £86,000. But in fact it does not, and advisers can be at the forefront of helping their clients not to be misled.
Tish Hanifan is founder and joint chair of the Society of Later life Advisers
