At the start of their term the Coalition pledged that no elderly person would have to sell their home in order to pay care costs while they were still alive. Instead they said that a provision would be made for local authority loans to cover the cost of care, which would then be paid back out of their estate after the person had died. Now however, the Government have said that this provision will only be available for people with assets of £23,250 or less.
Many middle-class pensioners have money tied up in other areas, or have set aside savings that exceed this figure. Taking away the offer of the loan means that they will more than likely have to sell their homes to cover care costs, reducing their chance to leave an inheritance to their next of kin.
The announcement of these loans came in 2011 after a report from the Coalition-formed Dilnot Commission, which was set up to look into the spiralling cost of care. This report recommended that the individual in need of care should pay no more that £35,000 before the state would step in to pay the rest. And while the Government is proposing a cap, their suggested figure is £71,000, and it won’t include basic “bed and board” fees, which can in some cases amount to around £10,000 a year.
This U-turn has been unpopular with many officials, who have said that the original scheme proposed by the Dilnot Commission has now been changed too radically by the Government for enough people to benefit. Middle-class people with relatively valuable houses are much more likely to also have assets that exceed £23,250. The new plans will mean they will have to spend down until they hit that mark, or risk covering their cost of care alone, which may mean they have to put their house on the market.
There is still a chance, however, that people with assets that exceed £23,250 may be able to have the cost of their care paid by a government loan. It will be up to local councils to decide who will qualify for the loans.
The change in policy calls into question whether it’s really worth saving through life for your old age or whether it would be better to live in rented accommodation, spending any savings on enjoyable activities such as hobbies and holidays. However, at Prestige Tax and Trust Services we believe there’s another way. If you hope to leave something more than happy memories behind for your family, it may be a good idea to plan ahead and look at setting up a trust. You can find more information on that here or by visiting our website.