The following article was originally posted on the?Mercer UK website.?You can find this article along with more wealth news content?here.?
By Regina Tan, Chartered Financial Planner, Mercer
Paying for care, whether that be for ourselves or our families, is an increasing worry for many of us in the UK. In this blog, we highlight the likely changes to, and share our insights on,?the Health and Care Bill.?
How will the new Bill affect me and my family?
This all depends on your assets and how much you earn, as care is still a means-tested benefit. The Bill proposes that from October 2023, the lower level at which you start to pay for care is when your assets are more than ￡20,000 (currently ￡23,250). Anyone with assets between ￡20,000 and ￡100,000 will contribute on a sliding scale. When an individual has assets more than ￡100,000, they will pay the full costs of care.
That said, an additional cap has been set and no one will ever pay more than ￡86,000 on personal care cost across their whole lifetime, as at that point the local authority will step in to foot the bill. The cap applies only to actual costs of “personal care”, however, and does not include living costs such as accommodation, utility bills and food, for example.
While the proposals are generally regarded as improvements on the current system, they may well create a disadvantage for people with fewer assets, who are likely to use up a bigger proportion of their assets than wealthier individuals. For example, after reaching the ￡86,000 cap, someone with a ￡100,000 house would be left with ￡20,000. (The first ￡20,000 of someone’s assets is protected under the proposal.) However, someone with a ￡500,000 house would be left with more, as shown below:
Who pays for my living costs?
Entitlement to local council financial assistance would also be based on any income received. Some will have to use their income to meet their living costs even?after?they reach the cap. Any means-tested council support payments are also excluded from the new ￡86,000 lifetime limit.??
The result? In reality, many people will be paying?more than?the ￡86,000 cap when living costs and care costs are added together.?
Will I have to sell my home?
If care is being provided or if a spouse or partner is living in the home, the value of the home is not included in the financial assessment. Therefore, the home would not need to be sold, and the value of the assets and cap would be levied on assets?excluding?the home. If no one else is living in the house and you go into a care home, however, then the home will be included in the assessment of assets. As such, you are likely to have to pay towards or cover the full costs of your care as well as the living costs.
Even if the home is included in the assessment, it may not have to be sold as local councils could arrange a payment plan, or you/your family can apply for a deferred payment agreement. Other options include releasing equity from the home, taking out a mortgage or renting out the house instead of selling it.
Finally, only an individual’s share of a property is assessed, so in some cases it might be possible to plan in advance and switch the ownership of a house from “jointly owned” to “tenants in common”.
Everyone's situation is different, however,?so make sure you do your research and seek professional financial advice before choosing your route forward. In summary:
The new proposals bring some welcome changes, but may have unintended financial consequences for some.
Planning is key if you feel these may impact you or your family.
There are legitimate ways to plan but be careful: councils will be looking out for any actions they regard as “deliberate asset deprivation”.
It is vital to have the appropriate legal paperwork in place, particularly lasting powers of attorney and wills, so make sure you address this well in advance.
In case you missed it,?listen back to our Women's Wealth Webinar?on “Supporting your loved ones whilst safeguarding your plans.”?
