Cap on care bills: real protection or fruitless attempt?

Following much discussion on the problem of elderly care, the Health Secretary Jeremy Hunt will announce the cap on elderly lifetime care costs.

30,000 to 40,000 homes are being sold in the UK every year in attempts to pay for care, with the current savings threshold of £23,000. The new regime would raise the threshold by £100,000. The state will also pay once the cost of care goes beyond £75,000. This is meant to protect people’s inheritance and afford more certainty and peace of mind.

On the face of it, this looks a very positive decision. But is it really that helpful?

The main point of criticism seems to be the fact that the cap is far higher than the figure of £25,000 to £50,000 recommended by the Dilnot Commission: it is claimed that people will still be forced to sell their homes, as anything above £50,000 will not protect families with limited means. It will also come at a price. The new plan will cost the state £1bn a year, and it is the tax payer who will bear the costs. With the Inheritance Tax threshold being frozen for 3 years from 2015 – 2016, many thousands will lose 40% of their inheritance over the nil rate band of £325,000. In effect, the cost of care is simply being shifted from selling the property during the lifetime of the person in need of care to inheritance tax liability on the family after the person’s death. Probably, the funds raised in such a manner will not be sufficient. Some even argue that it is fundamentally wrong to start a severely underfunded system.

It is reassuring that a step has been taken in the right direction, but it does not feel effective, as with the cap of £75,000 it will only protect about 10% of people in need of lifetime care.

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