PSA (Financial Services) Ltd

1 The Parade, Needham Avenue, Glen Parva, Leicester, LE2 9JW

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PSA (Financial Services) Ltd is authorised and regulated by the Financial Conduct Authority 231108

PSA (Financial Services) Ltd is registered in England and Wales company number 3934365

Paul Smith Associates is a trading name of PSA (Financial Services) Ltd

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Changes to Long Term Care

Coalition Government Ministers unveiled a series of radical changes to long-term care for the elderly designed to help around 100,000 people who do not currently receive support. The proposed changes are scheduled to begin in 2020 at the earliest.

The reforms follow recommendations drawn up by Andrew Dilnot, the economist who was appointed by David Cameron in 2011 amid growing criticism of the present social care regime.

Up to 50,000 people a year currently face having to sell their homes to afford care bills, such as help with washing, dressing and feeding themselves – a situation repeatedly condemned by the Prime Minister when he was in opposition.

Details of the new plans include:

  • a large increase in the threshold for means-testing – the level of savings which can be held before a pensioner has to contribute to the costs of their care;
    the overall “cap” on costs being confirmed at £72,000, much higher than the £35,000 recommended by Mr Dilnot’s review. However, sources said the £72,000 figure was at 2017 prices and on current rates was around £61,000.

  • pensioners have to meet  or will continue to have to meet  accommodation costs– the “bed and board” charge for care home stays. These will be limited to £12,500 per person per year;

The new move will cost the Treasury £1billion a year by 2020. It is understood this will be met from savings elsewhere, including recent pension changes and the decision to extend the freeze on the threshold for paying Inheritance Tax at £325,000 for individuals or £650,000 for couples for three years from 2015-16.

The crucial detail in the announcement will be the increase in the savings limit on help. Currently set at £23,250, this will be increased to £123,000. At this point, the Government will start paying some of the costs on a sliding scale depending on the pensioner’s level of income – but only £14,000 of savings are expected to be fully protected.

The government has proposed capping the maximum cost of social care at £72,000. The £72,000 cap will apply to every pensioner. For example, if both husband and wife end up moving into residential care, it could mean they will have to pay up to £150,000 before the State steps in.

Based on an average care home stay of five years, this means a person could still spend an average of £200,000 on fees for a basic care home, even taking help from the government into consideration as the proposed £72,000 cap on fees only applies to the cost of social care, not “food and board” costs which comprise the majority of care costs.

Under the new system, once a care home resident has spent £72,000 on fees, the state will step in and pay the basic rate for any more care required.


Before that point, it will also protect some assets and savings.

When a pensioner’s assets are drained down to £123,000, the state will meet some of the costs of care. Just the last £14,000 of savings are expected to be fully protected, as in the current system.

Once the state steps in, it will only pay for basic care, which will not necessarily meet the standards that the resident was previously paying for.


If pensioners are paying bills for care homes which are higher than the rates that councils will pay, they could be forced to move to cheaper care homes or to seek family help to pay “top-up” fees.

Ministers will also claim nobody will be forced to sell their home in their lifetime – with everyone given the right to defer paying until after their death.


The bulk of the overall cost will be met from savings obtained through recently announced changes to the pensions systems – which will see both private and public-sector employees having to pay more in National Insurance Contributions from 2017.

There has also been criticism of the government’s plans from inside Mr Dilnot’s commission. Lord Warner, one of its members, said an overall cap of £72,000 would still mean pensioners typically losing half the value of their homes before receiving any state help.