Social care cap a historic reform but financial planning remains an area of uncertainty

Confirmed this week, the Coalition Government’s £75,000 cap on care costs was announced as a ‘landmark reform’ that previous administrations had failed to realise.

Since the Dilnot Commission recommended a cap in July 2011, media speculation has focused on the Treasury’s support for its implementation, with fears that another government would seek to kick the issue into the long grass but, although not scheduled to be in place until 2017, it would appear the legislation will be fully supported in Parliament.

Announcing the cap, alongside a new means-test threshold of £123,000 which means that government will step in earlier to help with residential care costs, Health Secretary Jeremy Hunt commented:

”This is a watershed moment for our country. For too long, the issue of social care has been ducked by successive governments, leading to an unfair system that has seen people selling their homes and losing nearly everything they’ve worked for to pay for their care. With us, that unfairness is ending.

“These historic reforms will give everyone the protection they want in their old age and save the family home. And they prove once again that despite these tough economic times, this government is determined to get behind everyone who has worked hard and done the right thing and aspires to a better life for themselves and their children."

SOLLA (the Society of Later Life Advisors) are among those to welcome the cap, with joint chair Tish Hanifan commenting, “The combination of a raised threshold and the implementation of a cap is very much in line with the Dilnot recommendations which we have always welcomed.”

However, Ms Hanifan is not convinced that the cap will offer the certainty and peace of mind that Care and Support Minister Norman Lamb alluded to when he commented: “With an ageing population at a time of financial difficulties, we’ve taken tough decisions to bring about real reforms that will give everyone a more certain future.”

She explains: “The level at which the cap is set will inevitably mean that many people will find that they do not benefit at all or not to the extent they expected. Furthermore the detailed regulations and guidance that will need to underpin these changes will make the system much more complex than the headline announcements lead the consumer to believe.

“There is already a huge lack of understanding as to how much care will cost and who will pay for it. This new introduction of slicing out ‘hotel costs’ and setting the ‘financial clock’ for the cap running at Local Authority rates for care funding, will make the need for good specialist financial advice even more important if people are to make the best care choices.

“Importantly however, the announcement does highlight the fact that people will need to plan for their social care as part of their overall financial planning and in doing so, does eliminate the worry of a potential ‘catastrophic loss’ should high levels of care be needed in the future.”