Under proposals announced in the Conservative Party manifesto today, the value of the home will now be taken into account for those who receive care at home, as well those in residential care. However, £100,000 of assets will be protected, up from the current level of £23,250.
“This will ensure that, no matter how large the cost of care turns out to be, people will always retain at least £100,000 of their savings and assets, including value in the family home,” said the manifesto.
The current freedom to defer payments for residential care will be extended to those receiving care at home, so individuals will not have to sell their home in their lifetime to pay for care.
Prime Minister Theresa May said it is “the first proper plan to pay for and provide social care”.
Age Partnership technical manager Simon Chalk, said the proposal raises many questions that have yet to be answered, such as what happens if there is a dependent relative living at home.
“At the moment if someone goes into a care home and there is a wife/husband at home, the home is disregarded completely. If it’s no longer taken out of contention if you’re receiving care in the home, does that include couples?”
He added that individuals are likely to seek ways of avoiding paying and this could potentially result in an increase in the use of equity release.
“If people think they can avoid paying over money to government or the local authority they will look to do that – whether that’s by transferring assets or spending them,” he said.
“Lenders may want their capital back but the incentive to repay might be diminished. Those who are mortgage free may look to take out equity to make use of it or lifetime gift it to their children or grandchildren.”
However, Chalk said the situation for many people wouldn’t change and that the deciding factor would be what care is required.
Dean Mirfin, technical director at Key Retirement Group, said in fact the policy may simply be levelling the playing field rather than making substantive change.
“The bulk of people receiving care at home are already paying for it themselves,” he said.
“If a new scheme comes along, that gives people another alternative, but isn’t necessarily changing the landscape. This may be more of a political move than anything that’s going to save much money for the Treasury.”
However, he added that the lack of detail makes it hard to judge impact. “It almost stands out that the reason there are no details is because there don’t need to be. My view is that it isn’t as big a thing as people think.”
Would the option of delaying care payments actually make it more likely that people wouldn’t need equity release? Mirfin doesn’t think so.
“The majority of people funding care in the home are not necessarily doing equity release.”
He adds that money raised through a lifetime mortgage can be used for anything, whereas a government scheme to delay the payment of care would limit the use of the money for that purpose.