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North East, Yorks and Midlands most affected by care cap proposals

Older people with modest levels of wealth will be hardest hit by new care ‘cap’ provisions, a report has found.

Geographically, this points to the North East, Yorkshire and the Midlands, says the joint Institute for Fiscal Studies (IFS) and Health Foundation report, funded by the Health Foundation,

The government is proposing to change the legislation underlying the new £86,000 cap that people will have to pay towards their own social care costs. The amendment means that receipt of means-tested support to pay for care will not count towards the cap.

Key findings from the briefing:

  • Those with moderate income or assets, and who receive means-tested support to help them with care costs, would have to contribute to their own care costs for longer. Without the government’s amendment, someone needing residential care costing £700 per week would reach the cap after three years and four months, regardless of their levels of income and assets. With the amendment, someone with that care need who has annual income of £16,000 and assets of £100,000 would take almost 6.5 years to reach the cap. With that income, but assets of over £175,000, they would still reach the cap after just three years and four months.
  • Those experiencing costly care journeys, and who would be eligible for means-tested support, would make contributions for longer and spend more on their care. Under a ‘catastrophic’ cost scenario of a decade spent in residential care, someone with £106,000 in assets and annual income of £11,800 would be most affected. Under the government’s plans, their contribution towards their care would be £76,000, or 71% of their assets, compared with £44,000, or 41% of their assets, under existing legislation. Those with assets of over £186,000 would be unaffected.

These effects would impact most strongly on those in the second quintile of the wealth distribution. The government’s proposed amendment would mean that a 10-year residential care journey would consume an additional 10 per cent of assets or around £12,000, on average, for those in the second wealth quintile (those in households with wealth per person of between £83,000 and £183,000). This compares with negligible effects for the wealthiest 40 per cent – those with assets over £298,000.

Levels of wealth vary substantially across England. Those in the North East, Yorkshire & the Humber and the Midlands, where wealth tends to be lower, would see the biggest erosion of their protection against large care costs, as a result of the proposed amendment. Average per-person wealth among the 65-and-older population in the North East, where average house prices are £150,000, is around £150,000. This compares with an average of around £490,000 in London. If they were to spend 10 years in residential care, one in four individuals in the North East would have to contribute an additional 10 per cent of their initial assets to cover their care costs, as a result of the amendment. This compares with just one in forty of those in London.

The government’s proposed amendment would not substantially change the number of people at risk of having to use their housing wealth to pay for a long period of residential care since most who would receive means-tested support and have some housing wealth would have to draw on it even under the system without the amendment.

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