Social care won’t be solved overnight: we need to make our own plans

Sarah Coles, personal finance analyst at Hargreaves Lansdown, has written an article on the important subject of care, noting that social care won’t be solved overnight, as plans need to be made.

Sarah Coles said:

“Anyone involved with the social care system at the moment knows that life is a bleak combination of endless waiting and desperately trying not to get your hopes up. If you’re waiting for a concrete announcement on the subject from the government, you’ll understand that feeling.

“Two years on from promising to tackle social care, and more than ten years after the Dilot Commission said something urgently needed to be done about it, the government has announced that it’s seriously considering making plans.

“The hints this morning were for some kind of tax, aligned with a cap on the costs of care, which would meet the pledge that people wouldn’t have to sell their home to pay for care.

“The social care can can’t be kicked down the road any longer, but this is a serious problem that needs a serious solution. It means any suggestions can’t be thrown out as an after-thought. We need a comprehensive rethink of a sensible way to ensure everyone gets the care they need, without catastrophic costs.

“A cap on the cost of care would be an enormous relief. At the moment, it’s not only those who need care who are paying the price: without a holistic solution to the care crisis, there’s also an army of informal carers making huge sacrifices. Unpaid carers are more likely to work part time, and a significant minority have to give up work. It means losing income during their working lives, and having less opportunity to build a pension for retirement.

“This isn’t the first time this government has been said to be considering whether to bring in a new tax for social care. Last year there were reports that the government was thinking about introducing a tax on people over the age of 40 to help pay for care, although these were dismissed shortly afterwards. The government could resurrect these discussions, introduce a tax on income or consider a tax on wealth.

“When the Chancellor goes looking for a new source of income, it’s always worth considering your position. Regardless of whether a new tax is put in place to pay for social care, it’s safe to assume that the tax environment for savings, investment and pensions is unlikely to get any more generous – particularly for higher rate taxpayers. It makes it even more important to make sensible use of any allowances for things like ISAs and pensions, while we can.

“And while we can hope that this announcement is the beginning of a speedy conclusion to a decades-old problem, there’s still a strong chance that there’s more interminable waiting on the horizon. So in the interim, we all need to think about how we would pay for care for our loved ones in case they need it soon.

“Our research shows that one in three people (34%) think their parents will need paid-for care later in life, and when asked whether their parents could afford it, 45% said they had enough in savings, and 30% said they would have to sell the house to pay care bills. Almost one in ten (9%) said they’d have to pay for their parents’ care.

“If they don’t have savings or money in their pension they can use to cover the cost, it may mean considering how the value of their home could best be used, and whether it makes sense to sell up. Having these conversations well in advance can save an awful lot of heartache at a crisis point when someone needs care.

“It’s also vital that they draw up a Lasting Power of Attorney. There are two types – one for health and one for your finances. They enable someone they trust to make the right decisions about care and how to pay for it – which can take some of the heartache, complexity and cost out of the process.”

How the system works

In England, if you have assets of less than £14,250, the council may pay for care – although it will also take your income into account. It will do a needs assessment, and a means test to check your assets, and if you qualify on both counts it will arrange the level of care it decides you need.

If you’re getting care at home, or only going into a home temporarily, the means test will not include your home. If you’re going into a care home permanently, it may include your home, unless someone from specific groups also lives there. This includes your partner, any of your children under the age of 18, or a relative who is disabled or over the age of 60.

If you have between £14,250 and £23,250 you will have to contribute to the cost of care, but if you have assets over £23,250, you’ll need to foot the entire bill.

Kindly shared by Hargreaves Lansdown

Main photo courtesy of Pixabay