SOCIAL CARE SYSTEMS REFORMS – WHAT’S THE DEAL?

Britain’s social care system has long been a topic for debate, with pressure mounting on the current Government to find a solution to the challenges faced by escalating care costs and how to fund them.

The problems broadly come down to the fact that people don’t set aside enough (or in some cases any) money to pay for the cost of long-term care in later life which can run into hundreds of thousands of pounds.

Many are forced to deplete life savings and in some instances, sell the family home to pay the bills. Crucially, there is not enough government help.

Some long-awaited changes were finally announced [1]. Prime Minister Boris Johnson revealed plans that from October 2023 there will be a cap on how much pensioners will pay for care.

Proposals state that pensioners will still have to pay up to £86,000 – but then the Government will step in cover the rest of the bill.

Government estimates state that private payers would reach the £86,000 cap after three years in residential care and six years receiving care at home.

There will be other crucial changes. At the moment you have to pay for residential old-age care if you have more than £23,250 in assets if you live in England. The threshold is £50,000 in Wales [2] and £28,750 in Scotland [3].

The £23,250 limit will rise to £100,000 under the government’s new plans taking effect in October 2023.

People with assets of between £20,000 and £100,000 would contribute towards the costs of their care on a sliding scale.

Anyone with savings under £20,000 will not pay anything.

The relief will be enormous for families, knowing the state will eventually step in to help protect them from stress in an already difficult time.

The reforms might not be so popular, however, with those who will have to foot the bill.

From April 2022, the government will create a UK-wide health and social care levy on earned income, with dividend rates increasing too.

Boris Johnson announced a 1.25% rise in national insurance. The NI increase will, for the first time, include those above State pension age who are still working. They too will have to pay the tax under the Prime Minister’s plans.

Investors and business owners who pay themselves dividends will also contribute to the costs through higher taxes.

They currently pay a fixed rate of tax on income from dividends above the £2,000 tax-free limit, per person. Basic, higher and additional-rate taxpayers pay 7.5%, 32.5% and 38.1% respectively. For higher-rate and additional -rate taxpayers, this will rise to 33.75% and 39.35% respectively in April 2022 under the new plans.

Boris Johnson told MPs the combined tax rises will raise almost £36billion over the next three years. Yet the majority will be used to help the NHS recover from the pandemic, with only £5.4billion to be invested in adult social care over three years.

Since the demand for social care continues to grow as we all live longer, more money is likely to be needed in the future to cope with such demands.

Social care requests in England have risen by more than 100,000 per year in five years, according to the NHS[4]. Meanwhile, Age UK estimates 1.5 million people in England don’t have access to the support they need.[5]

Even with the reforms, there is still a very real need for individuals to make provisions for their own long-term care needs. For example, one major drawback of the new government policy measures is that the cost cap only covers a person’s personal care costs – meaning all food, energy and, most importantly, accommodation costs are not covered. These are the costs that can escalate quickly.

Talking to an adviser can help secure your future in an ever-changing landscape.

Source:

[1https://www.gov.uk/government/news/record-36-billion-investment-to-reform-nhs-and-social-care 

[2]  https://gov.wales/written-statement-raising-capital-limit-ps50000

[3] https://www.careinfoscotland.scot/topics/care-homes/paying-care-home-fees/capital-limits/

[4] https://www.bbc.co.uk/news/uk-politics-58469872 

[5]  https://www.ageuk.org.uk/latest-press/articles/2019/november/the-number-of-older-people-with-some-unmet-need-for-care-now-stands-at-1.5-million/