England’s social care cost cap

More details have emerged on the £86,000 social care cost cap for England.

At the start of September, the Prime Minister announced long-awaited plans for the funding of social care in England (Wales, Scotland and Northern Ireland all have their own social care funding regimes).

Alongside the announcement came the news of a new Health and Social Care Levy, effectively adding 1.25 percentage points to the National Insurance contributions of employers, employees and the self-employed throughout the UK from April 2022.

Two of the key features of the proposals, due to start in October 2023, were:

• New higher capital limits for means testing. The upper limit, above which you must pay for all your care, would rise from the current £23,250 to £100,000 and the lower limit, where your care costs are fully funded by your local authority, would rise from £14,250 to £20,000.
• An £86,000 cap on personal care costs paid, above which you would not have to make any contribution to your care costs.

In mid-November, the government revealed more information on how the cap would work in practice. It is less generous that had been expected:

• The cap only applies to your personal care costs, not living costs, such as accommodation and food. These will be assumed to be £200 a week for care home residents and normally must be met by the resident.
• Any top-up fees paid for superior facilities are ignored – everything is pegged to the local authority cost.
• Crucially, the cap is based on care payments made by you, but not the total care cost borne by you and your local authority, as had been expected.

The third point means that if you have capital of £106,000 or more, you could find yourself paying up to the cap to meet your care costs. Below that level of wealth, the risk is that you will pay until you reach the £20,000 lower capital threshold.

The cost-conscious hand of the Treasury has been blamed for the new interpretation of the fee cap. Whether or not that is true, the change is a reminder that the potential cost of care still needs to be built into your retirement plans.

The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.