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Boris Johnson’s social care reforms face revolt over cost cap – but do even bigger challenges lie ahead?

Tom Selby, senior analyst at AJ Bell
  • Prime Minister Boris Johnson’s flagship social care reform plans faced a revolt over the weekend after the Government announced details of how the £86,000 cap would work (Adult social care charging reform: further details – GOV.UK (www.gov.uk))
  • Under the plans, where savers are entitled to means-tested Government support to pay for care, this will not count towards the cap
  • This means those receiving means-tested help will face higher potential social care costs than previously envisaged
  • Government needs to focus on helping people save and invest to cover care costs

Tom Selby, head of retirement policy at AJ Bell, (pictured) comments:

“Boris Johnson is by no means the first Prime Minister to find himself in hot water over plans to reform the social care system.

“Indeed, for his predecessor Theresa May, it was confusion over her social care reform plans that ultimately contributed to general election disaster and her subsequent downfall as Prime Minister.

“The part of the proposals which has caused anger centres on the means-tested help people with assets below £100,000 may be entitled to.

“While previously it was thought this money would count towards the £86,000 cap, the Government snuck out an announcement late last week saying only the amount that the individual contributes to care costs will count towards the cap.

“The cap will only cover the cost of personal care, so ‘hotel’ costs like food and rent will need to be met by the individual outside the cap.

“The proposal to tweak the rules for the social care cap will clearly only hit those with assets below £100,000 who are entitled to means-tested help, and this alone will likely see Labour seize on the issue in the House of Commons.”

Focus on helping people save and invest to cover care costs

“There will also inevitably be debate over the level of the £86,000 cap given the relatively low savings many people have and the extremely limited set of social care products available in the UK.

“A cap on costs is clearly better than nothing – which is what we have had from successive Governments – but £86,000 remains a humungous bill and paying it would be a significant challenge for most people.

“When the idea of a cost cap was first proposed by Andrew Dilnot a decade ago, the hope was that insurance products would be developed to cater for the market. However, at this stage it remains unclear whether new products will be delivered or, crucially, whether people will buy them.

“Depending on how this plays out in the coming years, policymakers may need to revisit incentivising people to save for social care.

“This could be done through the ISA system, for example, through a product similar to a LISA – including an upfront bonus – but where withdrawals are only tax-free if used to pay for care.

“Policymakers could also investigate the idea of tax-free pensions access to pay for care, or using automatic enrolment to nudge people into saving for care alongside their retirement pot.

“In all cases, Government would need to be mindful of avoiding layering on extra complexity or undermining existing savings structures.”

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