Last month’s Queen’s Speech was criticised in some quarters for a lack of legislation – there were only 20 Bills announced, two of which were in draft. However, two of the Bills that did appear will have major long-term implications for most people:
- The Pensions Bill, which will introduce a complete overhaul of the state pension system and, in tandem, produce an annual £5 billion+ windfall to the Treasury through savings on national insurance.
- The Care Bill, which will mark an equally radical reform of the provision of care, but only in England.
The Care Bill had been trailed for some time and has its roots in proposals put forward in a report issued in July 2011 by the Government-sponsored Commission on Funding of Care and Support (aka the Dilnot Report). While ultimately the Bill will be a welcome improvement on the current long-term care funding rules, it is not a panacea:
- The cap on total lifetime care costs of £72,000, which will be index-linked, does not cover ‘general living costs’, which the Government puts at ‘around £12,000 a year’.
- The cap is based on what the local authority would pay for care, not what the individual chooses to pay. This means that if you want more comfort than the local authority would provide, there will still be a bill to pay.
- Anyone with capital of more than around £118,000 will have to meet all their own costs until the cap is reached.
- Anyone with capital of more than around £17,000 will have to make a contribution to their care costs until the cap is reached. How much this will be is not spelt out in the Bill – it is conveniently left to regulations. At present, the contribution is £1 a week per £250 of capital above the threshold (effectively about 21% of excess capital each year).
- The meter for the £72,000 ceiling will not start running until April 2016, so any expenditure before then will not count.
If you get the feeling that there remains a need to plan for the costs of long-term care, you are probably right. The legislation will eventually remove the extreme costs, but there could still be a six-figure bill for you to meet personally.