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Long term care – Dilnot Report provides little clarity
Despite the Dilnot Commission’s July 2011 report into funding long term care, there is unlikely to be any certainty until new legislation comes into force, possibly not until 2014. It will be some time before we see how far the proposals are adopted.
Putting the Dilnot Commission’s proposals into perspective, it seems that individuals who need long term care in a residential or nursing home will often find themselves paying more than £35,000 towards the fees. The cap applies only to the cost of the care element. Most individuals, apart from those with very limited resources, will contribute £10,000 a year towards their living costs.
Many individuals will choose to pay additional fees for better accommodation than the local authority will fund. In addition, the house-rich, cash-poor will still need to use their home t fund their care costs, whether it’s sold during their lifetime or afterwards.
The Current Position
Currently, many individuals who require long term residential care fund all or a substantial proportion of the costs. The means test sets low capital limits before all local authority funding for long term care provision is withdrawn. The means test also takes any income into account. This can leave an individual needing long-term care with just £14,250 of capital and £22.60 a week of income (in England for 2011).
Additionally, those who qualify for means-tested funding can find their local authority strictly rations provision. Increasingly, funding is only provided to those assessed as having the most severe needs. This effectively forces some of those needing residential care into self-funding from limited capital and income resources.
For those who self-fund their residential care costs, there is an NHS contribution towards nursing care costs that is subject to a needs assessment. From April 2011, this is a flat rate of £108.70 a week in England. However, some individuals still get the higher rate of £149.60, if they were assessed before 1st October 2007 as needing higher level nursing care and still require this. Different rates of NHS funding apply in Wales and Northern Ireland, and a more generous contribution is in place in Scotland.
There is also the possible entitlement to fully funded continuing NHS health care. An individual qualifies for this non-means tested support if their primary need is for health care. However, there is no right to choose the home where care is provided, and state benefits are affected in the same way as if the individual were in hospital.
Disregarded Capital for Means Testing
Some assets are disregarded as capital for the purposes of the means test. Surprisingly, this normally includes investments into life insurance investment bonds. This is because legally this type of investment is a life insurance policy. Because of this, the disregard does not apply to capital redemption bonds. The previous government consulted on removing the life insurance investment bond disregard. However, the coalition government dropped the proposed legislative changes, so the disregard currently remains in place.
Although the idea of having to sell up the family home causes concern, this should not happen while it is actually needed. For example, a home should be disregarded for the means test if it is still occupied by a spouse, civil partner or someone who is effectively a spouse or civil partner of the person needing residential care.
The content of this blog is for information only and does not constitute advice. It is based on our opinion and understanding of legislative and regulatory aspects of the financial arena. We strongly recommend that you seek professional advice before embarking on any course of action.