How will the cap on care fees work?

Shot of a senior woman with a cane looking thoughtfully out of a window at home

Ask the expert at Smith & Pinching about the cap on care fees ue to be introduced in October 2023 - Credit: Getty Images/iStockphoto

I have early signs of Parkinson’s disease so have had to face the fact that I will need to move into long-term care at some stage in the future. I have read that there will be a cap on care fees of £86,000 but don’t understand how that will work. Can you explain, please?

Jeremy Woodruff, Director and Chartered Financial Planner with Smith & Pinching

Jeremy Woodruff, Director and Chartered Financial Planner with Smith & Pinching - Credit: Smith & Pinching

Jeremy Woodruff of Smith & Pinching responds:

The planned cap on care fees is due to come into force in October 2023. The rules are complex so I suggest you get independent financial advice, but I’ll try to cover some of the basics here.

The legislation covers care fees in England only. Scotland, Wales and Northern Ireland will have their own rules. Another important point to note is that any care fees incurred before the new rules start sadly won’t count towards the cap.

The cap will apply to care fees both in residential care and for care at home. However, it will only apply to fees that have been paid by you (or others on your behalf): any financial support you get from the Local Authority won’t be counted.

With average fees in England in 2019/20 standing at £681 per week for residential care (more than £35,000 per year) and £979 per week (more than £50,000 per year) for nursing care, it might seem that the cap would be quickly reached, but actually only a part of that cost would count towards the cap. The cap will only cover the cost of providing actual care – such as help with dressing, eating, moving about, etc. – and won’t cover the cost of accommodation, food and other services that may be provided at the care home. It may take several years for you to reach the cap on fees, and you may have spent considerably more on the residential elements of your care in the interim.

There is support available via your Local Authority if you find you are no longer able to fund care yourself. The thresholds at which this support becomes available will also change under the legislation, with help potentially available from when your wealth drops to £100,000. You may still need to contribute at that point and your fees won’t be fully covered (up to the Local Authority’s maximum rate at the time) until your wealth drops to £20,000.

A Chartered Financial Planner can help with planning for care fees. We can show you the impact of fees on your wealth over time using lifetime cashflow planning, which will help you be confident about how you will meet at least one of the challenges you are facing.

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Any opinions expressed in this article do not constitute advice and is based on our understanding of the legislation as announced, which takes effect in October 2023.

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