How will the Conservatives’ social care policy work? What is the ‘dementia tax’?

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The Conservatives’ manifesto includes a new social care policy. The Conservatives’ social care policy means that your home will be taken into account if you have care at home. But you won’t have to sell it until you die, and you can keep £100,000 of its value. How will it work?

How will the Conservatives’ social care policy work?

The Conservatives say that the social care policy will be fairer because it will mean that people will be able to keep £100,000 of assets if they need care, which is far more than the current limit.

The big change is that the value of your home will be taken into account if you need care at home, and not just if you need to go into a nursing or residential home, which is the case at the moment. The Conservatives are also considering a big change which may mean that your home would be taken into account for means testing, if you own it jointly, if you’re the first person in a couple to need care. Currently that doesn’t happen if your husband, wife, civil partner or partner lives there (see below).

Who pays care fees under the current system?

At the moment, there are two different ways that your assets are assessed.

If you need to go into a care home, your local authority will assess your needs and your ability to pay. Your ability to pay will include assets you own, such as:

  • Savings
  • Investments
  • Your home. Your home’s value is only included in certain circumstances. If your husband, wife, civil partner or partner lives there, its value is ignored. The same applies if you have a relative aged 60 or over who lives there and there are other exceptions as well. Its value is also not included for the first 12 weeks that you need care.

If the value of your assets, including your home if it doesn’t fall into the categories I’ve mentioned above, is less than a certain amount, then they are ignored. This DOES NOT mean that the care you get in a care home is free. Any income from state or workplace pensions you have will be taken to pay your care home fees and you will be left with a small amount of spending money.

SAVVY TIP: Even if the local authority pays your care home fees, it may be the case that the local authority rate is lower than the amount the care home fee charges. So, if for example, the care home you’re in charges £750 a week but the local authority upper limit is £600 a week, there will be a shortfall of £150 a week. In that case, your relatives may be asked to pay the difference. It’s called a ‘third party top up’. Read more in my guide called Third party top-ups for care home fees.

If you need care at home, the local authority will look at the value of any savings and investments you have (as above), but will not include the value of your home.

What are the current limits on assets for means testing?

At the moment, there are different limits for the amount of assets you can keep, depending on whether you live in England, Scotland, Wales or Northern Ireland.

SAVVY TIP: Scotland also has a different system of paying care fees. Here you get a financial contribution towards the cost of your personal care if you’re aged 65 or over.

Here are the current limits for means testing over who pays care fees:

  • England: If you have assets below £14,250  (the lower threshold) only your income is taken into account when assessing whether you can pay for care. If you have between £14,250 and £23,250 (the upper threshold), you’re assumed to generate a certain amount of income from your savings or investments. But you’ll get some help from the local authority towards your care fees. If you have more than £23,250 in assets, you’ll have to pay for your care.

SAVVY TIP: You’re expected to pay £1 a week towards your care for every £250 you have in savings or assets between the lower and upper threshold. So, for example, if you had £20,250 in savings and didn’t own your own home, you’d have £6,000 in assets over and above the £14,250 threshold. If you divide this by 250, it would mean you’d be expected to pay £24 a week towards your care.

  • Wales: The threshold is £30,000 for care in a home and £24,000 for care at home.
  • Northern Ireland: The threshold is £23,250.
  • Scotland: The lower threshold is £16,250 and the upper limit is £26,250. This will rise on June 1st to £16,500 and £26,500.
  • All these figures are for 2017 – 18.

When do you have to pay your care fees?

If, for example, you needed to go into a care home and you owned your home, worth £200,000 and lived there alone, its value would be taken into account. That would mean you’d have to pay your own care fees.

Your relatives could either sell your home and use the proceeds to pay your care fees (or use it to buy a policy that will pay your fees for as long as you live), or you can ask your local council to let you delay or defer paying your care fees.

Once the available equity in your home (the value of the home minus the amount you’d paid for your care fees) reached £100,000, the local authority would start paying your care fees.

SAVVY TIP: If you want to defer your care fees, you will be charged interest by the local authority, but the interest rates are limited. Not everyone qualifies for being able to defer paying their fees, even if their local authority offers it (see below).

Local councils in England should offer this, although research published today by the pensions and insurance company, Royal London, shows that a number of councils have not offered this at all.

You can read more about deferring your care fees in my article: What are deferred payment agreements if you need to pay for your long-term care?

What the Conservatives are proposing

The Conservative government is planning to change the rules so that the value of your home is counted as an asset when you’re assessed for care at home as well as if you need to go into a care home.

They are also considering changes to how jointly owned property is treated. This could mean that, for married couples and others who own their property jointly, a charge is put on someone’s house when the first one in a couple needs care. Currently the house is ignored while your husband, wife, civil partner or partner lives there. This would be a massive change.

What they’ve also said is that you’ll always be left with at least £100,000 of the value of your home (or other assets, such as savings and investments) and that you will be able to defer paying the costs of your care until you die.

It means that if, for example, you were to get dementia and needed care at home or in a home for many years, and the cost of that care came to more than the value of your home, minus £100,000, the local authority would pick up the cost of your care. It does in effect guarantee that you will always have £100,000 left over once you’ve paid for your care fees.

SAVVY TIP: I’m assuming that you’d still have to give up any income you have from your state and workplace pensions, as is currently the case. This level of detail isn’t in the Conservative Party manifesto, so I’m only guessing.

Will there be a cap in the amount you have to pay in care home fees or fees at home?

The Conservative manifesto includes no mention of a cap in care fees. In fact it says of its proposals: “We consider it more equitable, within and across the generations, than the proposals following the Dilnot Report, which mostly benefited a small number of wealthier people.” The manifesto does say that there will be a Green Paper (consultation) on the proposals so nothing was set in stone when it was published.

However, there has undoubtedly been a change of policy today. Theresa May has now said that the Green Paper will include a cap on the amount of fees you will have to pay in your lifetime. There is no information on the level that this cap might be set at.

Will this cap be the same as the one previously proposed by the coalition government?

I don’t know and I’m not sure the Conservative Party does either. The Dilnot Report, which was commissioned by David Cameron, said that the care fees cap should be £72,000. However, crucially, this would only include the cost of any personal and social care, not what were called ‘hotel costs’ (food and accommodation). Hotel costs were not covered by the cap.

Using average care home fees for the calculations, it would take someone around five years to reach the level of £72,000 in personal and social care. The average stay in a care home is less than five years, so most people would die before they reached the cap of £72,000. Having said that, for people with illnesses such as dementia who can spend quite a number of years in a care home, the cap would limit the amount they’d have to pay.

What happens if my home is jointly owned?

Quite a few of you have asked me whether your home would be taken into account for care fees if it was jointly owned. The answer would depend on who lived there. If, for example, you owned your home jointly with your husband, wife, civil partner or partner, its value wouldn’t be taken into account while they still lived there.

If you own your property jointly with, say, your son or daughter, then it’s not just a case of the value of the property being divided by two and your ‘half’ going towards your care home fees. At the moment, according to Age UK, the rules say that the value of your half has to be based on what a ‘willing buyer’ would pay. You can read more about this in Age UK’s factsheet on the treatment of property in the means test for care fees.

Related articles:

Arranging care at home for an elderly relative

Section 117 aftercare: being sectioned under Section 3 of the Mental Health Act means your care is paid for

What are deferred payment agreements if you need to pay for your long-term care?

Looking after the finances of an elderly relative as a deputy; what does the Court of Protection do?

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