In this article Victoria Taylor, wills and estate planning solicitor, looks at the practical implications of The Care Act 2014.
Increasingly when clients come to see me they want to discuss how to plan for the payment of care home fees. Care home fees have been the subject of widespread media attention, yet there is still a lack of public understanding as to what responsibility individuals have to pay towards their care home fees.
The Care Act received Royal Assent on 14th May 2014 and represents the most significant reform of care and support for the last 60 years. For the first time, the Act places a limit on the amount anyone will have to pay towards the cost of their care.
Care costs are an increasing concern for our clients and while the Act provides a welcome simplification of the current care system, it does little to allay concerns.
The Act introduces two significant reforms:
- A cap on care costs of £72,000 has been introduced
- The upper asset threshold has been increased from £23,250 to £118,000
It is important to note that neither reform is being implemented until April 2016.
At first glance both reforms appear fairly radical but questions are being asked as to whether these reforms will have a significant impact on how care fees are funded. This is primarily due to how each reform is to be implemented.
Cap on care costs
The Government differentiates between ‘care’ costs and ‘board and lodging’ or ‘hotel’ costs such as the cost of food and accommodation. The fees charged by a care home usually cover both care and hotel costs and only the care element of the care home fees will count towards the £72,000 cap.
It is therefore estimated that the cap could take 7–10 years to reach. As self-funders live on average for just 4 years in care, the cap is likely to affect just a minority of those requiring care. And even if the cap is reached, the ‘hotel’ element of the fees will still be payable.
Increased upper asset threshold
At present, individuals with between £14,250 and £23,250 in capital and savings have their care costs subsidised according to a sliding scale: For every £250 over the lower threshold £1 is added to their assessed weekly income. Anyone with assets over £23,250 is liable to pay their own care costs in full.
The upper asset threshold is being increased under the Act to £118,000. Consequently it is claimed that only those with assets in excess of £118,000 will need to pay for their own care. The lower threshold is also being increased to £17,000.
It is important to note that the £118,000 does include your home so, at least initially, the majority of people will own capital in excess of the threshold and will therefore have to fund their own care entirely.
Once assets are below £118,000 the sliding scale applies, so £1 is added to the assessed weekly income for every £250 over the lower threshold. As an example, this means that someone with assets of £117,000 is below the upper asset threshold but deemed to have income of £400 per week (in addition to any actual income they receive such as State Pension). This exceeds the weekly contribution some Local Authorities will pay. Consequently most people are unlikely to receive any Local Authority funding until their assets have been depleted much further than the £118,000 threshold being heralded by the Government.