In October 2023, the government’s social care cap is due to come into force. Announced by Boris Johnson in September 2021, the cap will limit the amount you pay for care.

Interestingly, Oxfordshire is one of the local authorities due to trial the government’s plan.

While the cap will stand at £86,000, it won’t cover all of your care needs and could still result in a hefty bill for many.

Despite this, a recent report has found that nearly a third (30%) of over-60s don’t expect to pay for their own care and 41% don’t expect to pay toward helping a loved one.

The British Medical Association recently called the current system a “ticking time bomb”. It also deemed that current government proposals had “fallen significantly short of what is needed.”

Might now be a good time to revisit your later-life care plans?

Keep reading to find out.

The UK’s social care crisis looks set to continue

The Health Foundation confirms that England’s population is ageing. Between now and 2046, the number of over-85s will double to 2.6 million.

While the anticipated strain on care services has been relieved slightly by improved healthcare, leading to a fall in the proportion of older people needing social care, overall demand is still rising.

Speaking of “an unprecedented crisis,” chair of the BMA committee on community care, Dr Anil Jain, continued:

“Years of chronic underfunding, severe workforce issues and a fragmented system mean we cannot adequately meet the growing needs of the population.

This situation has been exacerbated by the pandemic, and government proposals to shape the future of social care have fallen significantly short of what is needed.”

Planning for later-life care now could save you time and worry later

Despite rising demand, social care remains off the radar for many, with

• 30% not expecting to pay for care at all
• 27% not knowing how they will pay for care
• 18% admitting to not planning that far ahead.

With the cost of care rising, making plans early is vital. Costs vary depending on where you are in the country and the exact type of care you need.

UK Care Guide suggest that average fees range from £27,000 to £39,000 a year for a residential care home. Costs increase to between £35,000 and £55,000 if nursing care is needed.

For those over-60s who understand the potential need to pay for care in later life:

• 27% plan to use their state pension
• 25% plan to use cash savings
• 18% expect to rely on their private pension
• 14% will sell assets, such as a house
• 13% expect the government to pay.

You could pay huge amounts for care, even after the care cap arrives

Under current rules, if you have more than £23,250 in assets, you’ll pay for your own fees with no maximum limit. This could substantially eat into your wealth and the value of your estate on death.

When the social care cap comes into force, those with assets under £20,000 will not pay for care, beyond a potential contribution from income.

If your assets exceed £100,000, you will need to pay for all care costs until the value of assets falls below this threshold. Those with assets valued between £20,000 and £100,000 may get some help from local authorities dependent on the value of assets and income.

Be aware that savings and asset thresholds differ in Scotland and Wales.

The social care cap of £86,000 means that this is the maximum you can expect to pay for care. However, the cap has drawn some criticism.

This is because it only covers the cost of care, not the daily living costs associated with that care. You’ll still need to pay for rent, bills, and food, which means you’ll need to budget for more than £86,000, even once the cap arrives.

Expert Wealth can help you factor potential care costs into your plans

At Expert Wealth, we take a holistic look at your finances, helping us to understand your potential income streams in retirement, and modelling these against your fluctuating outgoings.

When we build financial plans, we include the possible cost of social care towards the end of life as a default assumption for all our clients.

While we know that not everyone will need to pay for care – and that the costs are hugely uncertain for those that do – we aim to be “vaguely right rather than precisely wrong” in our lifetime cashflow forecasts.

We can also build tax-efficient contingencies meaning that if the money earmarked for care isn’t needed, you can be confident there is a plan in place.

With the strain on care providers growing, having a robust financial plan now can put you in control of your future, whatever it brings.

Get in touch

With decades of experience, our Chartered Financial Planners keep on top of legislation changes and the effects those changes could have on your long-term plans.

We have the expertise to help you plan for the potential costs of later-life care, so if you have any questions, please get in touch and speak to us today.

Please note

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.