Increasing number of people prepared to deplete wealth to avoid care costs

The proportion of people who would be happy to reduce their assets below the £23,250 threshold, in order to ensure the state pays for the majority of their long-term care, has almost doubled over the last year from 23 per cent to 41 per cent, according to a new report.

With an estimated 150,000 people entering care each year, the specialist insurer Partnership suggests this could see councils shouldering up to an additional £1.58bn burden in England alone if all of those who say they intend to spend their wealth do so.

The cap on care costs, which comes into force from 2016 does not cover accommodation or living expenses. Currently, anyone with assets of more than £23,250 is expected to pay for all of their care, whether in their own house or in a care home.

This led to elderly people being forced to sell their homes to pay for their care and triggered the setting up of the Dilnot Commission by the Government in 2010.

Councils in the South East (£330m) and North West (£240m) are likely to be most impacted by people's desire to avoid paying care bills, simply because of the relatively high number of care homes in these regions.

However, people in the East Midlands (53 per cent) are most likely to say they would spend their wealth and fall back on the state for support. Thomas Kenny, head of technical pricing at Partnership explains: “Despite the introduction of a proportion of the Care Act in April 2015, 61 per cent of over-45s are still confused about how the care system works, who funds it and how much it costs. With some viewing long-term care as a service that the state should pay for, you can see why they might think that they would rather spend their assets or give it to their families to avoid paying these bills.

“However, reality is often very different from theory! Not only do 77 per cent want the opportunity to live near their families if they go into care – not always an option for those the council funds – but 44 per cent say they have not even thought about care so this type of forward planning is unlikely. However, when the new legislation comes into force, this is something that councils will certainly need to watch for.”

He also points out that there is a far simpler way for people to organise their finances and adds: “By visiting a specialist financial adviser, people can learn how to structure their finances to not only meet their care cost obligations, but also learn how to ring fence money to leave to their families. This may involve the use of an immediate needs annuity – the only financial product specifically designed to cover the cost of care which guarantees to pay an income to meet a person’s care fees no matter how long they live.”

This research forms part of Partnership’s Third Care Index - for the full report see: https://www.partnership.co.uk/dmsdocument/324