When the cap doesn’t fit: Has the Govt killed off long-term care reform?

Hopes of a long-term care cap may be dead in the water, according to a former minister, despite protestations to the contrary from the Government.

Last week, the Government announced the introduction of a £72,000 limit on the cost of care will be pushed back from April 2016 to 2020, delaying the full implementation of the Care Act 2014, which passed into law last May.

The Department of Health has confirmed changes to means-tested support below the cap have also been delayed.

But in a period of continued austerity, will the reforms ever see the light of day?

Abandonment not delay 

Currently only those with under £23,250 in savings get help towards the cost of care, but the reforms would have allowed support for those with assets below £118,000, or £27,000 if a close relative lives in the property.

Speaking to Money Marketing, Liberal Democrat former care minister Norman Lamb says hopes the reforms will still be introduced are “naïve”.

“This is abandonment, and not delay. It would be naïvety in the extreme to regard this as a delay.

“It doesn’t require much complex thinking to realise that if the funding pressures are such that they felt they had to delay from 2016, it is unlikely to be any easier in 2020.

“This is a clear indication that the Tories have abandoned it and indeed, abandoned the commitment they made in their manifesto just three months ago.”

A Department of Health spokeswoman insists the Government remains “fully committed” to the implementation of the cap in 2020, but others are not convinced.

Janet Davies, managing director of long-term care organisation Symponia, says she is “positive” the plans have been axed.

“It has been no secret that this was a coalition sweetener and George Osborne didn’t like it, and made no bones about it,” she says.

“It’s possibly even good news because the introduction of the care cap stopped some people planning ahead and it was never the case that people could spend £72,000 and that would be it.”

The cap functioned by calculating the total that a council would spend in placing an individual into a care home, minus the “hotel costs” of £230 a week, or £12,000 annually, to cover costs such as a room, heating and food.

Davies estimates the average cost of a care home at £500 a week, but says even if a council agreed it would pay the same to place an individual in a care home the rule on hotel costs means only £270 of those average costs would count towards the cap.

As a result, in an average care home, it would take just over five years of paying £500 a week to reach the cap of £72,000, during which time an individual could have actually contributed more than £130,000 to the cost of their own care.

What is more, even after reaching the cap, people would still be liable for the £230 weekly hotel costs.

“When does £72,000 not mean £72,000? When it’s a care cap,” Davies says, adding the average stay in a care home is between two and four years, meaning many would not live long enough to reach the cap.

“It’s not rocket science to see that this actually wouldn’t have affected many people.”

The plans have proved similarly perplexing to many in the insurance sector, who questioned how providers could create products to help meet the cost of long-term care.

The Association of British Insurers and the Government signed a declaration of intent in January 2014, committing both sides to boosting the role of advice and helping the insurance industry offer a wider range of long-term care products.

A year later, some of the UK’s largest insurers flagged a lack of demand and said regulatory uncertainty was dampening any appetite to develop products.

Standard Life head of pensions strategy Jamie Jenkins says: “Long-term care insurance is difficult to sell to a 25-year-old and most providers didn’t believe there was much of a market for it. We need to find a way of funding it through savings rather than insurance.”

Lamb says the Government was aware the industry may not have had products available for April 2016 but maintains progress was being made by some providers. He says axing the cap now risks that work being lost.

“The cap had merit in its own right, irrespective of whether the insurance market signed up to offer products to complement it,” he says.

“I readily recognise we weren’t going to have the perfect insurance market from day one and I also understand this is an industry that needs to make sure it has a market for it to protect. It is not going to do this purely out of altruism.

“But many firms were working on adaptations of products, like pension schemes that would allow you to ring fence a sum of retirement savings with a view to helping to meet your needs.

“I fear that work will now be put on hold, and many firms might conclude it is not worth doing anyway.

“What the industry absolutely needs is certainty and as soon as something like this happens, they will just be drawing their own conclusions about whether or not this is ever going to happen.”

ABI director of long-term savings Yvonne Braun admits that all sides need to do more.

“This needs increased awareness and behavioural change, irrespective of whether and when there is a cap on how much people may have to pay,” Braun says.

“There are already products available that customers can use to meet the cost of care, such as immediate needs annuities and protection products that convert into social care cover. It is important we all continue to work together to create an environment which encourages people to plan and save for care.”

Aegon regulatory strategy manager Kate Smith adds the death of the cap would be disappointing.

She says: “There is a pressing social care issue. And the Government needs to be quite open and transparent about what it is going to do to allow us to develop products and to operate with some certainty.”

Aviva long-term care marketing manager Brian Fisher says the delay should allow Government to go back and re-evaluate its plans.

“This is an opportunity for the Government to have a really good think about what is important to the consumer so they get a good deal out of state provisions and they understand it’s something they are going to have to take responsibility for. The cap never achieved that.”

Adviser view

Andrew Dixson-Smith, business development director, Eldercare Group

Very few people ever understood the Dilnot cap and the whole thing was over-valued by some members of the public. When we explained it to them many realised it was too good to be true.

The reforms will now die a death and the Government will move away from it. Those that knew about it will see that it wasn’t worth a lot anyway, and those that didn’t won’t know any different.


JULY 2010

Andrew Dilnot is asked by the government to chair its commission on the funding of care and support

JULY 2011

Dilnot recommends a £35,000 ceiling on the cost of care, while also calling for an increase in the asset threshold at which people are responsible for paying for their own care from £23,250 to £100,000 and a cap on the amount care homes are able to charge residents for food and drink

JULY 2012

Health secretary Andrew Lansley unveils plans to allow people to borrow money from their local council to pay for care, with the money being recouped when their home is sold off after they die. Government also backs the principles of Dilnot’s recommendations


Lansley’s replacement, Jeremy Hunt, tells the Conservative Party conference the government is committed to implementing the Dilnot cap on social care costs “as soon as we are able”


The government announces it will introduce a care cost cap of £75,000 in April 2017, with a threshold of £123,000 at which people will be able to claim support, and a £12,000 limit on hotel costs

MARCH 2013

Chancellor George Osborne uses his Budget to announce a reduction in the cap to £72,000 and an acceleration of its deadline, bringing the plan forward to April 2016

MAY 2013

The Care Bill is introduced to parliament, including Lansley’s reforms on deferred payment, the cap on care costs and reduced limits on means testing for support below the £72,000 cap


The government and the ABI sign a declaration of intent, committing them to boosting the role of advice and helping the insurance industry offer a wider range of long-term care products

MAY 2014

The Care Act is given Royal Assent

APRIL 2015

Deferred payment arrangements to prevent the elderly having to sell their home to pay for care come into effect

MAY 2015

Conservatives win an outright majority in the general election

JULY 2015

Citing expected costs of £6bn over the next five years, Lord Prior of Brampton announces that the Dilnot cap and changes to means testing are pushed back to April 2020