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Social Care Funding Changes: made simple to understand

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In July 2011, economist Andrew Dilnot published his proposals on how to fund adult social care and make it both sustainable for the state and affordable for the elderly.

18 months later Health Secretary Jeremy Hunt has responded with the Government’s plans to revamp the care funding system in England.

We take a look at four changes to how social care for the elderly will be paid for – both privately and publicly – going forward:

1. £72,000 cap on how much individuals will pay

Around 10% of people currently end up paying over £100,000 in care costs as they grow old.

From April 2016, the amount you’ll have to pay for “standard-rate” care in England will be limited to £72,000 with the rest paid by the state. This was originally set to be capped at £75,000 and starting in 2017.

However, if your non-health costs exceed this standard-rate then you’ll likely need to make up the difference even after hitting the £72,000 cap.

Non-care costs such as food and accommodation aren’t included in the cap, and these ‘hotel’ costs can account for as much as £7,000 to £10,000 per year in today’s money, which you’ll need to pay on your own.

The Government’s cap almost doubles Dilnot’s preferred £35,000 figure, even after inflation is added; it means 16% of over-65s should face cheaper bills (compared to the 37% that would have been helped under Dilnot’s proposals).

2. How will you and I be able to pay for it?

It is hoped that setting a worst-case-scenario upper limit for how much you may need to pay will at the very least give you a target to plan for financially, against your future care needs.

The Government also hopes the cap will also encourage insurance companies and even pension providers to start providing for social care into their policies, although it has been disputed in some areas whether this will actually happen.

3. Means-testing threshold to rise from £23,250 to £123,000

Currently, elderly people who need to move into a residential care home are eligible for means-tested Government support if their total assets are worth £23,250 or less. £14,000 or less, and it’s free.

From April 2013, you will be able to claim some form of means-tested Government support for residential care up to a personal wealth threshold of £123,000. That figure is more or less in line with Dilnot’s proposals, taking into account inflation.

4. How will the Government fund its part?

The Government hopes to generate 80% of its expected £1bn annual spend on social care from extra National Insurance contributions which will start alongside the single-tier state pension in 2016.

The remaining 20% will be funded by freezing the existing Inheritance Tax threshold at £325,000 per person (£650,000 for couples) for an extra three years, until 2019.

5. What about Scotland, Wales & Northern Ireland?

Social care in Scotland

Currently, social (personal) care is available free to all pensioners living at home.

For elderly people living in residential care homes, the Scottish Government makes a flat rate contribution to your personal care or nursing costs, while ‘hotel’ or accommodation costs are means-tested.

However, at a current cost to the Scottish taxpayer of £500m per year there are concerns that Scotland too will face a social care funding gap as costs continue to grow.

Social care in Wales

There is currently a £50 per week cap on how much you’ll pay for care, provided you’re living at home and receiving non-residential services. However, there is no current cap on contributions toward residential care.

The Social Services and Well-being (Wales) Bill was introduced to the Welsh Assembly for consultation in January 2013; the effects of the changes made in England will be considered during its consultation prior to adopting or rejecting its measures.

Social care in Northern Ireland

Proposals for revamping social care in Northern Ireland were published in 2012, with consultation and review ongoing. Currently your personal assets are means-tested for Government support, similar to in England and Wales.

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