Cap on care costs: Is £86,000 the true figure and what do we know about the proposals?

The government has proposed to bring in a “cap” of £86,000 on October 2023 on the amount adults pay for their care. It will need to be voted on like any piece of new legislation and we have yet to see the details, but we already know that some services and costs won’t count towards the cap.

What care goes towards the cap?

A request to the local authority will need to be made to assess your “eligible needs”. If the local authority determines that you only need 1 care visit a day costing £30, but you believe you need and pay for a minimum of 2 care visits a day costing £60, only £30 will count towards the cap.

If the cost of your care includes accommodation, food etc., the amount you pay that goes towards the cost cap is reduced by £200 per week (or £10,400 per year). You will still have to pay £200 per week towards these services once you reach the cap (unlike now), but financial support will be available if you cannot meet this.[1]

The cap is calculated by reference to what the local authority is prepared to pay for your care

Once your “eligible needs” have been assessed, the cost of meeting those needs will need to be determined, providing you with a “personal budget”. The budget is often calculated by the assessor following a resource allocation system, either by:

• Asking a series of questions and converting the answers into a points score. A value is then assigned to each point and an algorithm then produces an “indicative amount” for the value of the personal budget.
• Estimating the indicative amount based on the number of hours of support you need.

Research suggests that most systems used generate incorrect figures, which have serious defects not only in the complexity by which they are devised but also in the rigidity some local authorities apply them.[2] Questions have been raised about the appropriateness of personal budgets to deliver personalised care to all groups, particularly older people and those with complex needs.[3] As such, the system by which your budget is determined could be flawed to your disadvantage.

Once the local authority has determined your personal budget (accurately or otherwise), it is likely you will have 2 choices: -

• The local authority arranges your care based on the personal budget, which you then pay for (subject to the cap and the value of your assets).

There is a risk that you may not consider the options provided by the local authority as adequate. A report by the Competition Market Authority in 2017,[4] found that some Local Authorities only offered a single option for the cheapest available care that met a person’s eligible needs. It also found that the process by which local authorities source care providers might prioritise lower fees, subject to meeting certain minimum quality standards, which take little account of the detailed care needs and preferences a person may have. This could mean that your care is not appropriately placed and the care provider may not be able to fully assess whether it can meet your needs from the outset.

As a result, whilst the local authority may source the perfect care for you, there is a risk they may not, which leads you to the second choice.

• You arrange your own care.

It is possible that the location, amount or quality of the care the local authority is offering will not be satisfactory to you, and as a result you may choose to arrange your own care. It is possible that you could end up paying far more than other people who have had their care sourced by the local authority.

In 2015 LaingBuisson,[5] having looked at a sample of care home groups operating in 12 English counties, found that self-funders pay over 40% more for the same services paid for by the local authority.

As such, there is a chance that the cost of the care you arrange will be more than the personal budget you have been given and the difference will not count towards the cap.

When does the local authority start paying for your care?

I have assets of more than £100,000

Whilst you have assets worth more than £100,000 (subject to the current disregards) you will be responsible for funding all of your care until you either reach the cap of £86,000 or your assets fall to £100,000.

I have assets of between £20,000 and £100,000

Your income will be used to pay for the cost of your care plus £1 for every £250 of assets not exceeding 20% of the value of your assets. For example, if you have £50,000 of assets, you would pay £10,000 per year towards the cost of your care plus your available income.

I have assets of less than £20,000

If you have not reached the care cap of £86,000 then your income (but not your other assets) can still be used to pay for the cost of your care and the local authority will pay the balance.

What income can you keep?

For those with assets below £20,000 and who have not reached the cap, the amount of income you can keep is currently: -

• per week for those receiving care at home

A couple and at least 1 person is over pension age                      £144.30 (each)

A couple and at least 1 person is over 18 but under pension age £71.80 (each)

Single person over the state pension age                                    £189.00

Single person between 25 and the state pension age                  £91.40

Single person under 25                                                              £72.40

• per week for those receiving care at a residential or care home - £24.90

The government has said that from April 2022 these levels will rise with inflation.

Once you reach the care cap of £86,000 your income will not be taken into account.

What can you do now to plan for the future?

Review your will

The traditional approach to writing a will is to leave all of your assets to your surviving spouse or partner. This would mean that, after the first of you to die, a substantial part of your estate could be used to pay for your spouse’s or partner’s care fees.

It is possible to structure your will in such a way that your spouse or partner can still benefit from your assets, but they are unlikely to be taken into account for care fees. This could enable your spouse or partner to stay in their care or nursing home of choice for longer and make it more likely that your other loved ones will receive more from your estate than might otherwise have been the case.

Take steps to mitigate against Inheritance Tax

Some steps taken with the main intention to mitigate Inheritance Tax may reduce the amount of assets that are available to pay for your care, which is not considered as “deliberate deprivation of assets” (see below).

Make Lasting Powers of Attorney

A Lasting Power of Attorney gives authority to someone else to make decisions on your behalf if you lack the necessary mental capacity in the future.

If you lose capacity to manage your finances and have not made a Lasting Power of Attorney, potentially any assets or property that you own in your own name or jointly with anyone else (even a spouse or civil partner) could be frozen. To deal with your assets, an application to the court will be needed for a Deputyship Order. It often takes around 6 months to obtain a Deputyship Order, which is a costly and paper heavy exercise. Once a Deputyship Order is granted, it is likely that the Deputy will need to submit a return to the court every year stating what you own, your outgoings and your income and a fee may be payable to the court to review the return.

As a result, it is preferable to make a Lasting Power of Attorney now while you have capacity, which will considerably ease the burden on your loved ones. It will also allow you to say who should make decisions for you, when and how.

What should you not do when planning for the future?

You should not give away assets with the sole or significant intention of reducing the amount you contribute towards the cost of your care. This is known as “deliberate deprivation of assets”.

If you are found to have intentionally deprived yourself of assets, the local authority may treat you as still owning the asset or recover their charges from the person you gave your asset to. There is no limit on the time the local authority can look back to see when you gave the asset away.

Even if you never need care, if you give away an asset to another person, you lose control of that asset. Although you may trust that person now, what if that person loses capacity, divorces, dies or your relationship with them goes downhill? In any of the above cases, you may have lost an asset which you need later.

If your needs are such that you need care provided in a care home, don’t delay your move. If you are in a care home of your own choosing when the care cap comes into force, you may be in a better position than had you stayed put. This is not only because you will be in the best place suited for your needs, but the local authority is more likely to be persuaded to increase your personal budget. The reasons are helpfully set out by Age UK[6] as follows: -

“the local authority must show your personal budget is sufficient to meet your needs for care and support. This means it must demonstrate it is sufficient to meet the cost of an available, alternative, suitable care home that you can be safely moved to, based on an assessment of your individual needs. If it cannot... instead, the local authority must increase your personal budget to allow you to stay where you are.

If the authority says you must move unless a top-up is paid, ask it to show that your personal budget is enough to meet your individual needs for care and support. The needs assessment must take into account psychological, cultural, or social wellbeing factors, which might require you to remain in your current care home and consider any health and wellbeing risks due to moving. Ask for a copy of your needs assessment to make sure all your needs have been taken into account.

In a recent complaint report, the Local Government and Social Care Ombudsman highlighted the requirement to carry out a risk assessment of moving to a new care home –

‘It is widely known that moving a vulnerable elderly resident, especially those who have dementia, to another care home where everything…is unfamiliar, can have a damaging impact on their physical and mental wellbeing. As such, this is a risk that a Council should properly assess and record, when proposing such a move’.

When should I review my will, obtain advice on Inheritance Tax or make Lasting Power of Attorney?

Efficient Inheritance Tax planning cannot be left until the last moment and can often only be undertaken whilst you have capacity.

You can only make a will or a Lasting Power of Attorney whilst you have capacity to do so. If you do not have capacity, an application to the court will be necessary, which is a long and expensive exercise.

Unless you have a crystal ball and can see into the future, you should take steps now whilst you have capacity to do so. Please get in touch with one of our teams in Winchester, Alresford, Sunningdale or London. Alternatively you can contact us by telephone on 01962 841041 or email info@taylorfordyce.co.uk.