Capped adult social care costs: who stands to benefit?

Social care funding in the UK is facing a big shake-up. Kate Anderson takes a look at the key changes and who stands to benefit.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

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According to Boris Johnson, social care funding in the UK is going to be subject to the “biggest catch-up programme in the NHS’ history”. The ‘health and social care levy’ has dominated headlines due to a 1.25% rise in National Insurance and tax on share dividends. But who will actually benefit from this shake-up?

A key element of the plan is a cap on adult social care costs, which could be a gamechanger for anyone needing care in later life. Let’s take a look.

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Capped adult social care costs

Under the current system, social care costs can reach hundreds of thousands of pounds. Often, those who require such care end up having to sell their homes in order to fund the costs.

But from October 2023, the government will introduce an £86,000 cap on the amount anyone in England will need to spend on their personal care in a lifetime.

The cap will mean that people will no longer have to deal with unpredictable or unlimited care costs. It will hopefully mean that selling your assets to fund your care should become a thing of the past.

Means-tested system

As it stands, those in England with assets worth more than £23,250 have to pay for their social care.

Under the system that has just been announced, anyone with assets below £20,000 will not have to pay anything from their savings or the value of their home to fund care. Although, they may have to make contributions from any income.

Those with assets of between £20,000 and £100,000 will be eligible for some means-tested support. The biggest change here is that the upper limit on capital is over four times that of the current limit of £23,250.

It’s also worth noting that people in this bracket will not contribute more than 20% of their assets each year. And once their assets are worth less than £20,000, they will pay nothing more.

Finally, those with assets above the £100,000 threshold must meet all care fees until their assets fall below that level. But this is where the £86,000 cap on social care costs comes into play. It equates to roughly three years of full-time care.

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Takeaway

The purpose behind this shake-up is to make social care in the UK more affordable. There has been a huge gap in funding, which has led to many people shouldering the cost of their care. As a result, their assets have been slowly eroded over time.

However, it is important to remember that while social care may be covered once someone hits the cap, they will still need to contribute towards daily living costs.

This is why, whatever your circumstances, thinking about your retirement savings early on is key. Making a plan for later life means that you can aim to be financially secure.

Everyone’s circumstances are different, so it makes sense to seek independent financial advice if you are thinking about making changes to how much you save into your pension. If you want some help with this, you can search for an independent advisor using a site like Unbiased.

No one can predict what will happen in later life and whether or not they will need social care. But planning for your retirement can be the first step towards improving your overall financial wellbeing.

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