Social care cap of £86K – but contributions already made before cut-off date won’t count

Social care funding debate discussed on Jeremy Vine

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Speaking at the Commons the Prime Minister said COVID has placed massive pressures on the NHS and social care system in the UK and measures were needed to fix the long term problems that have been exposed by the pandemic.  He said the cap will raise almost £36billion over the next three years which will go straight to the frontline, enabling the Tory government to radicalise the care system. He added the reforms will mean those who earn more will pay more, including business owners and shareholders. Those who have assets of less than £20,000 will not have to pay anything.

In the biggest shake up to social care reforms in over a decade, the Prime Minister announced changes that he hopes will take the financial burden off families who are paying for their loved ones’ care.

He announced a cap on social care of £86,000 and said those with less than £20,000 in assets wouldn’t have to pay a penny.

Opposition leader Keir Starmer criticised the announcements and said we’re facing the toughest winter in history.

He added that although the pandemic has hit the UK hard, the Conservative party was responsible for cutting £8bn from social care before the crisis and Mr Johnson’s solution was an attempt at putting a ‘sticking plaster over the wounds’.

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“Governments have ducked this problem for decades,” Boris Johnson said while unveiling his new plans at the House of Commons today.

He went on to say “there can be no more dither and delay” before adding that from October 2023, no-one will have to pay more than £86,000 for care over their lifetime as part of the government’s social care plan.

Anyone who has assets of less than £20,000 will have their care costs fully covered by the state.

Those with assets between £20,000 and £100,000 will receive some means-tested state support.

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How will this be funded?

To fund the plans, National Insurance contributions will rise by 1.25 percent and tax on share dividends will also go up by 1.25 percent. The changes will come into effect from April 2022.

From 2023 the NI increase will appear on people’s payslips as a separate Health & Social Care levy.

Mr Johnson said free care for all, or indeed private healthcare, were both unrealistic options. He said “a universal system of free care for all” would be “needlessly expensive” adding that demand for private healthcare would also be “too low”.

He also said calls to raise income tax instead would mean people would have to pay a lot more and was not the right solution. There will be a 1.25 percent increase in National Insurance from April 2022 to address the funding crisis.

What will change for Brits?

  • A 1.25% increase in National Insurance from April 2022 to address the funding crisis
  • The plans place a cap on the amount individuals can spend over their life, with the taxpayer funding costs on top of this
  • From October 2023, no one starting care in England will be forced to spend more than £86,000 over their lifetime
  • The changes will only apply in England, as Scotland, Wales and Northern Ireland have separate arrangements for social care.

Shona Lowe, Managing Director – Private Client & Corporate Director, financial planning from abrdn commented on the government’s announcement today on the funding of long term care. “Today’s announcement gives us some much needed hope that the long term care issue will be tackled, even if not everyone with agrees with the how,” she said.

“A conversation around how long term care will be funded is often delayed by people until it’s too late. Raising awareness of the issue and its potentially significant impact on family finances should make clients more willing to bring it into their financial planning earlier.

“Planning for the future can be a difficult area for clients, particularly when that involves considering the possibility of declining physical and mental health. Wills and Power of Attorney are now an integral part of that future plan and this proposed reform should ensure long term care planning is too. This is a good thing for the individuals concerned and their wider family.”

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