Boris Johnson defends National Insurance levy in Parliament
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This cap on social care is set to be introduced in October 2023, however the new policy only applies to “personal care”, which is considered the physical act of looking after someone and is regulated by the Care Quality Commission. Due to this detail in the fine print, the social care cap will not cover every essential residential cost, which are commonly referred to as “hotel costs”. Hotel costs include bills such as food, accommodation and cleaning in a care home, which are expensive for many Britons who have to pay up.
Currently in the UK, figures from the Department of Health and Social Care show that one million people are in receipt of residential care or home care, with about 800,000 of them being elderly.
On top of this, researchers estimate only 40,000 of the 800,000 individuals who receive care will benefit from this cap. This is based on the average life expectancy within care homes across the country.
Latest Government figures suggest that one in seven adults over 65 years old will have to deal with care costs of more than £100,000 during their lives.
Speaking in the House of Commons yesterday, Mr Johnson outlined why the cap is an important measure in his Government’s social care agenda.
Details of the cap were introduced to Parliament in a paper which stated: “We will invest £5.4billion in adult social care over the next three years to deliver the funding and system reform commitments set out in this document.
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“To begin this transformation in adult social care, the Government will introduce a cap on personal care costs.”
Finance experts are calling the Government for their lack of full transparency over what the cap will cover and which bills Britons will still need to pay out of their own pockets.
Stephen Lowe, Group Communications Director at retirement specialist Just Group, explained why Britons need to be aware of the costs they will still need to pay despite the Government’s £86,000 social care cap.
“A cap of £86,000 is only a start when considering the total costs people will be expected to bear because it excludes the ‘hotel’ costs – such as accommodation and food,” he said.
“It could easily take perhaps three or four years and perhaps £200,000 to £400,000 of associated spending to reach the cap.
“So financial planning to avoid catastrophic loss of assets will continue to be a valuable service provided by financial advisers.
“Seven in ten of over 45s who have had to organise care for a family member said they found the care system very complex and were shocked at how expensive care is.”
According to Steven Cameron, Pensions Director at Aegon, more “clarity” regarding the cap is needed by the Government to avoid families having to sell their homes.
“While the state through taxpayers will be funding an increased share, under the new deal, individuals who need care will still have to make a personal contribution based on their wealth.
“But crucially, this will be limited by the new £86,000 cap, avoiding those who need care for lengthy periods facing catastrophic six figure costs which can wipe out life savings and force the sale of the family home.
“Clarity will be needed on the requirement to pay for ‘room and board’ costs if in a residential care home.
“Another key change is to the means tested threshold under which the state will step in to cover part of care costs where an individual’s savings or wealth are or fall below £100,000.
“Currently, the threshold is a far lower £23,250. This will mean that many more individuals will be able to keep more of their savings.”
Ahead of the cap’s 2023 launch, experts such as Louise Higham, Financial Planning Director at Tilney, are calling on the British public to not be drawn into a “false sense of security” over the cap as they may still face an expensive social care bill.
Ms Higham said: “It is not clear what the cap of £86,000 on what people will be asked to pay over their lifetime will actually cover.
“For example, will accommodation costs be included in the cap? Accommodation costs could represent sizeable amounts if not included.
“People could still be left in a very difficult financial position if care costs have not been planned for and, in a worst case scenario, could mean that the family home may ultimately need to be sold in order to pay for care.
“Families shouldn’t get drawn into a false sense of security that their care needs will be taken care of through the measures announced by the government today and they should therefore get a financial plan in place early on to ensure there isn’t a funding gap.”
According to the Government, anyone with assets under £20,000 will have their care costs fully covered by the state from October 203.
Those with annual earnings between £20,000 and £100,000 will be expected to contribute to their costs however will still be eligible for state support.
As the social care debate continues, the Government is likely to elaborate further on how the cap will impact food and accommodation bills going forward.
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