Half the UK to pay more than £177,000 before cap reached

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Half the UK to pay more than £177,000 before cap reached

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While the introduction of the £72,000 limit on care spending has been widely anticipated, Partnership has warned that many consumers may need to spend the equivalent of the value of their home before they reach it.

The typical English homeowner would need to spend £177,500 on social care costs over more than six years before they hit the cap, according to Partnership, which calculated this is equivalent to 92 per cent of their housing equity (£193,426).

Under the new system, while a person in England may spend £28,964 on care each year, only the amount the local authority would agree to pay (an average of £23,764) less ‘hotel costs’ (set at £12,000) is taken into account.

This means just £11,764 each year would be counted towards the cap, so it is possible they could spend £177,500 before reaching the cap and receiving any state contribution (unless they enter the ‘means-tested’ social care system prior to this).

Those in Yorkshire would need to spend the highest proportion of their housing wealth (147%) on care compared to those in London (40%) and the south east (68%). People in the West Midlands would need to spend the most before they hit the cap (£211,000).  This is because Local Authorities in different parts of the country will pay different rates for care.

Thomas Kenny, head of technical pricing at Partnership, said: “While the government has said that no one will be forced to sell their home, this is the largest asset that many people have and it may well be their only option.  “To avoid watching the capital that they have built over a lifetime being eroded by costs, they should speak to a specialist independent financial adviser who will be able to recommend the best course of action.

He added: “This may include using a care annuity which is the only product specifically designed to pay a person’s care fees – irrespective of how long they live – which means they can have the peace of mind that they can meet their costs and leave an inheritance if they so wish.”

In a report on product innovation by the Association of Professional Financial Advisers, Partnership said advice referrals to help people fund their care needs were needed as it said the new rules make the system “in some ways… more complicated”.