Given some of the political reaction to the recently announced £75,000 social care cap, you could be forgiven for thinking that the long-standing problem of how we fund care for the nation’s elderly has been solved in one fell swoop. The limit isn’t entirely without merits, and the powers that be must be given some credit for finally addressing the issue, but assuming the threshold is an all-encompassing panacea is a naïve standpoint and I’ll explain why.
Perhaps the most obvious shortcoming is that the majority of people will still not receive any assistance from the State. Less than a fifth of people face care costs in excess of £75,000, meaning a large proportion of individuals will still have to foot their entire bill alone. It is reassuring for those saddled with huge expenses that there is a finite limit, but the average elderly person will not really be any better off unless they qualify by virtue of falling below the means-testing threshold.
Another limiting factor of the new measure is that individuals are restricted in their options. With the cap only including services that are available at the normal council cost, individuals wanting to move into a better class of care home or pay extra for the best help will have to personally cover the expense. This may also cause issues around relocation if elderly people are forced to move out of their preferred area in order to stay within the provisions on the scheme. No-one is suggesting the State foots the bill to ensure every individual stays in the swankiest care home, but in areas where provision of such facilities is poor, it may cause some upset if people are uprooted or moved away from friends and family.
A final flaw is the fact that the cap doesn’t really change the fact that care homes will still be expensive places. Setting aside the actual cost of the care itself, there are accommodation bills on top of that encompassing expenses such as food, bills and renting the room.
All the above means that the cost of long-term care for the elderly is anything but a closed book and the vast majority of individuals will still need to think about how they plan to afford it. The Government is essentially saying it wants individuals to take a joint responsibility for their own care costs and this is the right approach, but it doesn’t actually provide individuals with the means to do so.
As far as we are concerned, equity release still represents an effective way for individuals to help fund such expenses and it is important that it is presented as one such option open to the elderly. It may not be suitable in every circumstance, but it is vital that it is at least considered by older homeowners and their families. Perhaps the next step by the Government could be more guidance for the elderly as to how they can amass the funds necessary and tipping a nod towards home reversions and lifetime mortgages would be a good starting point.
Chris Prior is manager, sales and distribution at Bridgewater Equity Release