The Health Secretary, Andrew Lansley, announced yesterday the government’s plans for a new payment system for social care in the UK, alongside the White Paper and draft bill for the care sector.
The scheme will allow people receiving care to pay for costs after they have passed away, using the value of their home when it is sold. This is essentially a type of loan, which is being referred to as a ‘universal deferred payment’. Relatives of the deceased will be responsible for selling the property, paying back the government and producing any amount that is required in interest.
The main objective of the proposal is to prevent people from having to go through the stress and trauma of selling their home to pay for care costs.
People will also be able to opt in or out of the scheme, depending on their circumstances and care needs. For example, if somebody has a care insurance policy or has saved a sufficient amount, they may pay for care upfront. Equally, if somebody begins their term of care within the government’s scheme and personal circumstances change (for example a family member is able take over from the social care provider) they may opt out, only having to repay the costs already incurred.
In terms of the value of your estate being used against care costs, if there is any difference either way your family will not lose out. If your home sells for more than your care fees, this will go back into your inheritance estate value. However, if your home sells for less than your care fees, your local authority will pay the difference, meaning your family will not have to produce the money.
The decision to hold off on a care cost cap has invited criticism from those in the pension sector. Dr Ros Altmann, Director General of Saga, said:
"The suggested ‘universal deferred payment' loans may merely delay people having to sell their homes but does not set a limit on how much people should spend on care. We also do not know what interest rate will be charged on these loans."
Vanessa Owen, Head of Equity Release at LV=, added:
"It is a real concern for people who face the burden of funding long term care, as they continue to be faced with an open ended bill which makes it difficult to plan effectively to meet these costs.
“The Government needs to ensure people can properly plan for care costs, that their total wealth isn't quickly eroded, and families aren't left with big care bills to pay after a relative passes away."
Those in the care and pension sectors are concerned that the absence of a cost cap leaves those in need of care, and their families, facing uncertain costs, which might undermine the government’s wish to save people from financial worry in the first place.
While the government’s proposal is seemingly a move in the right direction in the eyes of many concerned about the state of the UK’s social care system, it remains to be seen whether - and at what amount - a cap will be implemented.