If you said yes to that question, you are not alone. The majority of people, including other advisers that specialise in this area also      find the new social care changes and care cap difficult to understand. This article breaks down the basics behind the proposed changes.

Who currently pays for Care?

The value of your assets determine what you have to pay.

At present if you have assets in excess of £23,250 you are classed as being a self-funder and will pay for your own care, whether its in your own home or in a care home.

If your assets are between £14,250 and £23,250 you will be required to make a contribution towards your care from your income and/or capital until your assets fall under £14,250. The council will top up the rest.

Should you assets fall under £14,250 you no longer pay fees from your capital, but you must continue paying from income included in the means test. The council pay the remaining cost of your care.

So what is changing?

In October 2023 the government intends to bring a new ‘Care Cap’ into play whereby once you have paid £86,000 towards care fees you will no longer pay for your care fees. However, it’s not quite as simple as it seems.

Each person that requires care will need to be assessed as to whether they meet the ‘eligible needs’ for care. Once the person needing care has been assessed as having ‘eligible needs’ the clock will start ticking until their contributions towards the cost of meeting their eligible needs hits the £86,000 cap.

So what are the ‘eligible needs’ that need to be met?

Unfortunately, this has not yet been disclosed by the Government. Therefore there is no indication which sort care costs will count towards the £86,000 cap.

If your needs are ‘not eligible’ these costs will not count towards the cap.

Daily Living Costs are the charges for living in a care home, things such as the accommodation and food. This cost has been set at £200 per week as standard nationwide for anyone in a care home. These costs will not count towards the care cap. Neither will any contributions made by the NHS.

The government have also confirmed that ‘top up payments will not count (where the person or a third party chooses to make additional payments for a preferred choice of accommodation or care arrangements).

So there seem to be a lot of costs that don’t go towards the cap, but what does?

Each local authority will have their own personal budget. For Yorkshire and the Humber, the average fee for a local authority paid care home is £533 per week. Based on £533 average amount, the following would go towards the care cap:

£200 per week – Daily Living Costs, doesn’t count towards the cap
£333 per week – Does count towards the cap

So what if my care is more than £533 per week?

On average in Yorkshire and the Humber a self-funder will pay £722 per week for care*. However, many clients in care homes pay much higher fees than this per week.

The difference between the Local Authority Care Cost and the fee actually paid will not count towards the cap. This is deemed to be a ‘top up’ where the person or a third party chooses to make additional payments for a preferred choice of accommodation or care arrangements.

This means if you pay £722 per week for care, only £333 per week will count towards the care cap and a staggering £389 per week will not. Based on the £722 per week example, the following would count towards the care cap:

£200 per week – Daily Living Costs, does not count towards the cap
£189 per week – Top Up, does not count towards the cap
£333 per week – Does count towards the cap

On that basis it will take almost 4.9 years before you reach the proposed £86,000 care cap, based on £333 per week. During this time, you could have paid an additional £183,965.60 towards your care (£722 per week x 4.9 years). After reaching the care cap, you will still be liable to pay the amounts that don’t go towards the care cap (i.e. £389 per week).

How can we help?

The planned Government changes to the Social Care Act are complicated. Our adviser Sophie Smith is a specialist in this area and an Accredited Member of the Society of Later Life Advisers (SOLLA).

Sophie is able to offer personalised advice and information. She is able to discuss your funding options when it comes to paying care fees, give you advice and help you budget properly.

*Source: Laing and Buisson Care Homes for Older People Report, 31st edition

If you would like to discuss investment strategies or any other financial planning matter, please do not hesitate to contact us on 0114 2588899 or email info@fogwilljones.co.uk. Our Independent Financial Advisers are qualified to provide advice in the areas of retirement planning, tax planning, savings, inheritance tax, investments and protection.

Please remember that the value of investments may fall as well as rise in value.