Money Matters

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Following on from last month’s ‘Policy statement on care and support funding reform’, the Budget 2013 has confirmed the Government’s view that the existing social care funding system exposes individuals to catastrophic care costs.

The Budget 2013 has therefore announced that the Government will introduce a £72,000 cap on reasonable social care costs, and extend the means test to give more people access to financial support for their residential care costs from April 2016.

The Government will partly fund the reforms by freezing the Inheritance Tax nil rate band of £325,000 until 2017/2018. Last month’s policy statement had set the cap at £75,000, to be introduced in April 2017.

The key words in the Budget 2013 are ‘reasonable social care costs’: this means that not all costs will be taken into account, and specifically not any costs relating to a charge for accommodation. The best way of illustrating the problems with the changes suggested in the Budget 2013, is by way of example:

l It is April 2016 and Mr and Mrs Smith own a property worth £220,000 and have cash assets of £140,000.

l Mrs Smith has been in a care home for a year and a half (78 weeks), at a cost of £750 per week which she has paid without any financial assistance from the local authority, to give a total cost to her of £58,500 already.

l Due to the change in the rules, Mr Smith asks the local authority to assess Mrs Smith so that she can enter the ‘capped cost system’. The local authority are happy that Mrs Smith falls within the eligibility criteria, and Mr Smith looks forward to his wife receiving financial assistance which he expects to be in 18 weeks by which point Mrs Smith’s total spending would have reached £72,000.

l However, the local authority say that the £58,500 spent prior to April 2016 will not be taken into account. The local authority also say that of the £750 per week Mrs Smith is paying, £230 per week is deemed to be a contribution to ‘accommodation costs’ and so will not be taken into account towards the cap. Of the remaining £520 per week which Mrs Smith is paying towards her ‘care costs’, the Local Authority say that they will only take account of £420 per week towards the cap because they could provide Mrs Smith’s care at this cost.

l It will therefore be almost three years, four months (171 weeks) before the £72,000 cap is reached. By that time, Mrs Smith will have spent a total of £186,750 on her care. If Mr Smith were to require care himself then similar charges may arise for him also.

As is clear from the above, careful planning to protect assets from the potential liability of care home fees remains appropriate.