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Govt confirms £75k LTC cap will be funded by abolition of contracting-out

London UK Parliament Big Ben Lamp 480

The Government has confirmed plans to introduce a £75,000 cap on long-term care costs will be partly funded by increased employer national insurance contributions as a result of the abolition of contracting-out.

This afternoon, health secretary Jeremy Hunt told Parliament the new cap – which does not include accommodation or food costs – will be introduced in April 2017.

The Government will also increase the asset threshold above which people do not receive means-tested help from the Government from £23,250 to £123,000.

The Department of Health says the reforms – which will cost the Treasury an extra £1bn a year – will be partly funded by extending the freeze on the inheritance tax threshold at £325,000, or up to £650,000 for couples, by three years from 2015/16.

The rest of the money will come from the extra 3.4 per cent public and private sector employer NI contributions which will flow to the Treasury when contracting-out is abolished as a result of the introduction of a single-tier state pension for future retirees.

It is not yet clear how much of the contracting-out cash will be spent on the care reforms.

Hunt says: “This is a watershed moment for our country. For too long, the issue of social care has been ducked by successive Governments, leading to an unfair system that has seen people selling their homes and losing nearly everything they’ve worked for to pay for their care. With us, that unfairness is ending.

“These historic reforms will give everyone the protection they want in their old age and save the family home.

“And they prove once again that despite these tough economic times, this Government is determined to get behind everyone who has worked hard and done the right thing and aspires to a better life for themselves and their children.”

Responding for Labour, shadow health secretary Andy Burnham describes the proposals as “a plan for the few, not the many” and says they “fail the fairness test”.

He also questions whether the level of the cap, which is higher than the Dilnot Commission originally proposed, will stimulate a market for long-term care insurance.

“This is a step forward, but it is a faltering one,” he says.


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Impressive that the government’s position that the Flat Rate State Pension changes would be ‘cost-neutral’ didn’t manage to last even a month.

    Now the government’s position is that the additional NI review will help fund the LTC costs.

    Maybe the government should buy itself another calculator as their current one clearly doesn’t add up correctly.

  2. At the risk of sounding a bit thick, can anyone tell me – if the new cap does not include accomodation and food costs, what DOES it include?

  3. I see there’s a new round of ‘Yes Minister’ running.

    This would seem to be an extension of it!

  4. As every good IFA knows with proper planning IHT can be largely a “voluntary” tax.

    I would suspect most IFAs will be on the phone to their clients to review wills, trusts, gifts, insurances etc

  5. @pussycat … the cost of care itself rather than the ‘bed and board’ of the care home.

    AFAIK this is the case in Scotland – though it’s not always made clear when it’s reported on.

    Whilst I feel that the proposals are a step in the right direction and are in line with broad expectations, there needs to be clarity in the minds of the public as to what costs will still fall on the individual as I suspect many will not separate out the cost of care and that of ‘bed and board’.

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