Pensions  

Scrap of social care cap to impact savings

Scrap of social care cap to impact savings

Health minister Jackie Doyle-Price confirmed last week that the £72,500 cap on social care will be scrapped, which makes retirement planning more difficult, pension experts say.

Prime minister Theresa May’s predecessor, David Cameron, had promised to bring in an upper limit on the amount people must pay towards their own care, following recommendations of the Dilnot commission in 2011.

Ms Doyle-Price told the Parliament that the government would not be "taking forward the previous government's plans to implement a cap on care costs in 2020".

Instead, there will be a process of "initial engagement over the coming months" to define the long-term reforms, which will be set out in a green paper due to be published next year.

According to Sir Steve Webb, director of policy at Royal London and former pensions minister, “it is all very well the government telling us what they are ‘not’ going to do, but we urgently need to know how they are going to solve the social care funding crisis”.

He said: “Most people are struggling to save enough for basic living costs in retirement without needing to set aside tens of thousands for possible care costs.

“We need some sort of cap on care costs so that individuals are not at risk of losing everything and so that insurance providers can come up with viable products for consumers.”

Back in May, Ms May was forced to say the Conservative government would set an “absolute limit” on the amount people pay for social care after her original plans for funding social care, unveiled as part of the Conservative party general election manifesto, were dubbed "a dementia tax". 

After three days of mounting political criticism of her social care reforms Mrs May bowed to warnings from Tory candidates that it was hitting the party hard on the doorstep.

Ms Doyle-Price comments are now confirming what was already been rumoured in October.

Ms Doyle-Price said: "The prime minister has been clear that the consultation will include proposals to place a limit on the care costs individuals face.

"To allow for fuller engagement and development of the approach with reforms to the care system and the way it is paid for considered in the round, we will not be taking forward the previous government's plans to implement a cap on care costs in 2020."

Rachel Vahey, product technical manager at Nucleus, told FTAdviser that these latest developments show that “there is general confusion over how much people in England will pay for long term care in the future”.

She said: “Until this policy is fixed, people have very little security of knowing what costs they may be liable for.

“This makes planning for their future extremely difficult. They will have to judge how much of their wealth - including their pension pot - may have to be used to pay for any care costs, and adjust their financial planning accordingly.”