5 Facts about the Care Fees Funding Cap

In April 2015, the law relating to the provision of social care underwent what some refer to as the most significant changes in a generation, with the introduction of the Care Act 2014.

Here’s 5 things you need to know:

  1. The Personal Expense Allowance – when an individual requires care and is means tested, the first thing to be taken to fund their care is their income. All an individual’s means testable income will be taken to fund their care, with just £24.40 per week, the Personal Expense Allowance, being left untouched (unless of course your income is such that you have surplus after covering the cost of care, but at £30k-£50k+ per annum, that’s not everyone).
  2. The means test – As with the previous system, a means test will be conducted by the relevant Local Authority when an individual needs to access care. The means test is an assessment of an individual’s assets (income, property, savings etc) to ascertain whether they should be funding their care themselves. The means test thresholds for capital assets will change in April 2016 and haven’t yet been finalised, but we have been given an indication of where they will be set:
    • Assets less then £17,000 = your care will be funded in full by your Local Authority
    • Assets more than £118,000 = you will have to cover the cost of your care in full
    • Assets between £17,000 and £118,000 = you will have to make a contribution towards the cost of your care, which could be significant
  3. The funding cap is due to be introduced in April 2016. It is intended to limit the amount an individual will be required to pay towards their care at £72,000, but it isn’t quite as simple as it seems:
    • The funding cap doesn’t include the cost of board and lodgings, expected to be capped at £12,000 per annum
    • You could have paid significantly more than £72,000 by the time you reach the funding cap. This is because your contributions towards the funding cap aren’t based on what you pay, but rather a rate set by your Local Authority to meet your eligible needs, which could be far less than the actual cost of your care
  4. Deferred Payment Agreements doesn't mean you have to sell your home to fund your care. Initial statements by Government ministers suggested there would be no need for anyone to sell their home to fund their care. However, the legislation actually introduces a nationwide scheme, called Deferred Payment Agreements, which could mean your home doesn’t need to be sold during your lifetime. There is a big difference.
    • A charge is placed against your home, up to a maximum of 70-80% of it’s value
    • Interest is charged at a rate of between 3.5% and 5% per annum
    • A Deferred Payment Agreement simply defers the payment of care fees, with interest being added annually
  5. You can plan ahead and protect what you’ve worked hard for – using a Trust, created under the terms of your Will or during your lifetime, can help protect your home and savings for future generations. However, for this planning to be effective, it must be done at a time when you are fit and healthy.

Taking advice as to the right Trust for your particular circumstances is essential and you can take the first step. 

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