The cost of long-term care, which is due to be capped at £72,000 from 2016, may be funded by financial products such as pensions in the future
Earlier this week, a cap of £72,000 on the costs of long-term care was set by the government in the hope of ending a culture of older people being forced to sell their homes to pay for care – something 40,000 people do every year under the current system.
Our guide to long-term care has more information on how funding works.
One pot of money for old age
Although just one in eight pensioners will benefit from the £72,000 cap, financial products (such as insurance or pensions) that supplement what the state offers will help all older people have a more comfortable retirement.
The Department of Health stressed more people will benefit as a result of a rise in the means test threshold to £118,000, with 100,000 people set to receive some form of financial support as a result of the reforms by 2025/26.
Get more information on how pension pots can help you save for retirement in our guide to pensions.
The new rules for long-term care
Under the new scheme, due to come into force in 2015, every local council in England will be required to offer loans to cover the cost of care, which can then be repaid from the person’s estate when they die. This is called the ‘deferred payments scheme’.
The local authorities will be allowed to charge interest on the loans to cover their running costs, but will not be able to make a profit from them.
Under the reforms £12,000 a year paid by residents of care homes will not count towards the cap as it judged to cover the cost of bed and board.
The government is consulting on the scheme’s details until October 25.
Long-term care reforms debate
Norman Lamb, Care and Support Minister, said: ‘These reforms bring reassurance to millions of people by ending the existing unfair system so no one need face unlimited care costs or the prospect of selling their home in their lifetime.
‘Now we are unveiling proposals for how the new system will operate and what it can do to help people plan and prepare for future care costs, and over the next three months we’ll be seeking people’s views on making it a reality.
‘No one wants to face an unknown future. This overhaul of the way care is paid for gives people the certainty and peace of mind we all deserve.’
However, opposition politicians said these reforms will not help people who are struggling with care costs now.