Written by Steven Cameron, Pensions Director at Aegon UK
Kicking the social care can down the road again with a 2 year delay will come as a blow to thousands expecting it to go live in October 2023 and will mean many simply won’t live to see the benefit.
It could easily cost those paying towards their care an additional £26,000 for every year of delay, while also sorely depleting the savings of those with assets under £100,000 who’ll need to wait another 2 years for promised extra means tested support.
The new social care funding deal announced late last year has 3 parts:
- The £86,000 cap on personal contributions, albeit only on ‘eligible’ care costs
- A notional, national £200 per week allocation for Daily Living Costs
- Earlier entitlements to means tested support
Together, these will allow people to plan ahead rather than being caught by the more they save, the more they would be asked to fund themselves.
Deferring the cap by 2 years
The £86,000 cap on ‘eligible’ personal contributions to care costs means those who require care for lengthy periods will, once implemented, no longer face paying indefinite or ‘catastrophic’ costs for their care which can currently wipe out life savings. Eligible personal contributions made from October 2023 onwards were to have counted towards the cap but the 2 year’s deferral means only personal contributions made after October 2025 will count.
Local authorities will set ‘eligible’ costs, based on what they’d pay for the care they assess an individual as needing. If in a residential care home, you’ll need to pay for ‘Daily Living Costs’ (DLC), or ‘room and board’ and the new deal sets this at a national, notional amount of £200 per week.
Let’s say a local authority would pay £700 a week to a care home and £200 of this would be considered as ‘daily living costs’ which even under the new deal must be paid indefinitely. £500 a week will count as eligible care costs towards the cap but with a 52 week delay, individuals will have paid £26,000 before the clock starts ticking under the new deal.
Delaying means tested support
The new deal was to have introduced more generous means tested support from October 2023, but this will now be pushed back to October 2025. Under the new deal, individuals become eligible for some support if assets fall below £100,000 and once they fall to £20,000 will no longer need to use assets to pay for care. This will mean many more individuals will start receiving some Government support sooner.
But pushing the deal back 2 years means individuals who would have benefitted will have to wait an extra 2 years to do so and in the meantime will be having to use their savings to cover care costs without the additional Government support. Those with modest assets of £100,000 or less will be particularly affected by this and could see much of their savings wiped out before the new deal kicks in.