Pay up or sell up – the stark choice facing homeowners under new social care reforms

Many homeowners may still have to sell their homes to pay for their own care later in life as reforms which were meant to tackle unfairness in the way the social care system is funded fall short of levelling the playing field, according to one leading Shropshire law firm.  

FBC Manby Bowdler’s Wills, Probate and Lifetime Planning team have been through the finer details of the social care reforms due to come into effect in October 2023, including the latest guidance notes from the Government, published on 19 November, which clarify how council support affects the cap. The firm is urging people to check the small print before they decide on their own care plans as they could be left significantly out of pocket.

“The Government announced the reforms with a promise that no-one will pay more than £86,000 for their care but this so-called ‘care cap’ is very misleading,” says Carina Kervin, Partner in FBC Manby Bowdler’s Wills, Probate and Lifetime Planning team.

“Firstly, the new guidance notes reveal that only payments people make themselves from their own funds will count towards the cap. This means that any means-tested council funding you receive will not go towards the maximum amount you will be expected to contribute to your care costs.

“Secondly, care is the only thing covered by the cap, and not daily living costs which go towards food, energy bills and accommodation.

“As such, all of the money you will be paying for living costs (which can add a considerable amount onto the weekly cost of your care) will not be taken into account when the Government decides how much you should be contributing to your own care, and this could eat through any savings or assets you have very quickly.”

The Government also promised that nobody needing care should be forced to sell their home to pay for it. But Carina has warned that this too isn’t as clear cut as it appears.

She says: “The reality is that if you don’t have adequate funds to pay for your care home placement (either from savings or income) and you don’t qualify for National Health Service or Local Authority funding, then your home becomes a fundamental part of the equation. This could mean selling your home in your lifetime to fund your care or entering into a Deferred Payment Agreement (DPA) with a Local Authority.”

The Government is championing the use of DPAs and says these loan agreements with a Local Authority will be available to all. In a DPA, the Local Authority agrees to pay your care costs upfront and the money for your care is recouped from the sale of your house after your death or at any time the property is sold during your lifetime, which of course greatly diminishes the inheritance you are leaving to your loved ones. These DPAs are subject to interest and administration fees, so advice should always be taken before entering into such an agreement.

Carina adds: “While the reforms to social care funding have been largely welcomed, homeowners need to understand the implications of the rule changes on their future plans. Many may still have to sell their home during their lifetime to pay for their care or alternatively, their families will have to sell it in the event of their death.

“Ultimately, despite these proposed reforms, we are still likely to see a generation of people who have saved all their lives unable to leave anything significant behind for their loved ones.” 

The best course of action for people who wish to protect assets from care fees is to take advice at the earliest opportunity.  With appropriate planning, people can protect assets to pass on to the next generation. The problem is that people often leave it too late.

If you would like to know more about how social care reforms will affect you, please visit https://www.fbcmb.co.uk/media-hub-area/answering-your-care-cap-questions/ or contact Carina Kervin on 01743 284143 or email [email protected] for an informal discussion with one of FBC Manby Bowdler’s Will, Probate and Future Planning team.