Care concerns as MPs vote on lifetime cap

MPs have voted for a change to a new social care cap in England, excluding means-tested local authority support from the £86,000 lifetime limit on care costs. In a narrow victory for the government, the amendment succeeded but could mean poorer families are disproportionately affected by the change.

When introduced, the lifetime cap will cover fees paid for personal care, including help with washing and dressing. However, the cap will not apply to so-called ‘hotel costs’, including home fees, food or utility bills.

The lifetime cap on care fees forms part of a broader social care plan introduced in October 2023. When introduced, those with eligible assets of less than £20,000 will not pay anything towards care fees, although they might have to contribute from any income. People with more than £100,000 in eligible assets, including the value of their home, savings and investments, will not receive any financial support from their local authority towards the cost of care.

Local authority support will be made available for people with eligible assets between £20,000 and £100,000, but the lifetime cap of £86,000 will apply to personal contributions. Before becoming law, the social care bill now heads back to the House of Lords, where peers are widely expected to suggest amendments.

The government says that nobody would lose out due to the reforms, compared to the current system for social care funding, and most people needing care in later life would benefit financially. Before their vote, an impact assessment was not made available to MPs to quantify the likely scale of any benefit from the changes.

With the government pushing for these reforms to social care funding, new research shows that 31% rank the prospect of not being able to afford good quality, long-term care as one of their top financial concerns.

Forming part of the Great British Retirement Survey from Interactive Investor, the survey found that 29% of retired respondents said a further key concern for them was money they would otherwise leave to relatives going on long term care instead.

Not being able to afford healthcare costs when needed was another top-three concern for a quarter of retired people, according to the survey of more than 10,000 people.

Becky O’Connor, Head of Pensions and Savings, interactive investor, said:

“It’s very difficult planning to cover care costs because you can’t know if you are going to need it or not.

“The findings from the Great British Retirement Survey show that concerns about the cost of care play on people’s minds. There are limited ways to pay for it. Many people would understandably prefer to pay for it out of unused ISA and pensions balances rather than selling their home or taking an equity release loan. However this requires contributing even more when you are fit, well and working, so that you can have enough both for retirement income and potential care costs.

“If you do need to pay for care, this can of course significantly eat into what you can leave from your pension or other investments to relatives. The survey shows that this is also a concern, but less so, perhaps because of an understanding that there is very little anyone can do about how much care they are going to need in order to protect an inheritance for loved ones.

“This is something to bear in mind also for younger generations who might be expecting to receive an inheritance. They need to be mindful that this can’t be taken for granted because of the potential bill for care.”

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