Elderly care proposals: all you need to know about the Dilnot report

The Dilnot report is looking into paying for elderly care, but what do its proposals mean for you?

Older and disabled people could have to pay up to up to £50,000 towards their own care costs, a government review is expected to recommend.

The Dilnot commission, an independent body chaired by the economist Andrew Dilnot, has published its recommendations on the funding of social care and support in England. Here’s what you need to know.

What is social care?

It is the care and support services that help frail and disabled people remain independent, active and safe. This might include helping someone bathe and preparing cooked meals. Support services can be provided in someone’s home, in a community centre or in a care home.

The costs of such care are either paid for by individuals or on a means-tested basis by local authorities in the form of specific services or cash payments that enable people to make their own care and support arrangements.

How do you qualify for means-tested help?

If social services assess someone as needing residential care in England, and they have less than £14,250 in financial assets, he or she will qualify for local authority long-term care. Those with savings or assets (including their home if they live alone) of between £14,250 and £23,250 will get some help towards costs, but those with assets or savings of more than £23,250 will have to pay for the full cost of their care.

If they are assessed as needing care at home, they are entitled to help from the local authority but can be charged for it up to the full cost of the help required. The value of their savings is assessed, as is their income, but the value of their house is not taken into account. Charging for care at home is done under local rules, so varies between local authorities.

Charges made by a council should only be as high as the actual cost of providing the care – the council is not able to make a profit through the charges – and should not leave anyone below the current level of pension guarantee credit plus a buffer of 25%.

Why do we need a review of funding arrangements?

Older people make up the largest group of social care users and although the number of people over the age of 85 has risen by two-thirds since 2004, local authority budgets for social care have stood still and are now being cut. Demand far outstrips supply.

The charity AgeUK says councils are rationing services by offering support only to people with very high levels of care needs – those who need help getting out of bed, going to the toilet, washing and other essential daily tasks.

Even then, they often get an inadequate level of support. People living in their own home may only have short visits to help them get dressed and wash (AgeUK cites anecdotal cases of older care recipients being made to sit on the toilet while being fed their lunch because the carer doesn’t have time to do the two things separately), while the fees paid to support people in care homes are often unrealistically low.

A further complication is that each council decides for itself how much to spend on older people’s care. This means that levels of care and the qualification criteria vary: while you might qualify for help in one borough, you might not in another. AgeUK estimates that currently there are 800,000 older people who need care but do not receive it from the state, and that this will increase to 1 million by 2014.

At the same time, people are failing to make adequate provision to pay for care if they don’t qualify for means-tested help. A survey for the housing and care charity Anchor has found that only 6% of those questioned were saving for old-age care. Yet only 8% would willingly sell their home to pay for such care – 44% thought the government should foot the whole cost, but only 14% would be happy to pay higher taxes to fund this.

So what does the Dilnot report say?

It recommends that the government sets a cap on an individual’s contribution towards his or her own care costs over their lifetime, with the government meeting any costs above the cap. Dilnot suggests a range for the cap of between £25,000 and £50,000, but thinks £35,000 was the most appropriate and fair figure.

In addition, people should pay towards their living costs such as food and accommodation, but again a cap should be set on this. The commission suggests a cap of between £7,000 and £10,000 a year.

Dilnot also recommends that the means-test upper limit should be raised to £100,000 from the current £23,250, allowing people to keep more of the assets they have built up over the years.

It also says all those who enter adulthood with a care and support need should be eligible for free state support immediately rather than being subjected to a means-test.

Those developing an eligible need for social care from the age of 40 to retirement should be subject to a tiered cap, starting at £10,000 for a 40-year-old, £20,000 for a 50-year-old, £30,000 for a 60-year-old and £35,000 for a 65-year-old.

When is this likely to become effective?

The report recommends implementation from 2013, and Dilnot is hoping for publication of a white paper by next Easter.

Labour is pushing for cross-party talks within the next couple of weeks. A senior party source said: “We will be contacting the Cameron and Clegg offices today to see if we can start to arrange a time for the talks. We see no reason, if they agree, why we can’t get going before parliament breaks up for summer.”

But although Dilnot says he would be “astonished” if the government kicked his report into the long grass, it is far from certain it will accept all of its recommendations as it is estimated the reforms could cost about £1.7bn a year.

How will the government pay for all this?

Dilnot suggests the government reprioritise existing expenditure or introduce a specific tax increase to cover the cost – a tax which should fall on those in retirement as well as those still working. However, he makes no recommendations on this, saying it is a political decision.

What should I do to prepare for care costs in old age?

The report recommends that councils should have a statutory duty to provide advice. In the meantime, however, it is up to individuals to seek advice and read around the subject. Good sources of information include the Money Advice Service, Paying for Care, and AgeUK. If you prefer to speak to someone in person you can find a specialist adviser through the Society of Later Life Advisers.

Although there are specialist products designed to help people pay for long-term care, they are complicated and usually very expensive. Insurance policies are available to pay for immediate-needs care and pre-funded care. But pre-funded policies are not popular, not least because you may never need to claim on them and so lose your money. Immediate-needs care annuities are more commonly used by families wanting a hedge against part or all of the cost of care fees should their older relatives live longer than their capital.

Currently, two companies – Partnership and Axa – dominate this market, and the initial outlay can be enormous. But if Dilnot’s recommendations are accepted insurance products designed to meet the cost of care up to the cap are likely to become mainstream and hopefully cheaper and more simple.

Will I have to sell my home to fund my own care?

Not necessarily. If you are married and your spouse needs to continue living in your home, its value will not be included in the means-testing calculations.

Even if it is included, you might be able to build up alternative savings or take out insurance to cover the cost of care. Alternatively, your home could be rented out and your care costs paid from the income. However, this will need supervision by, and the support of, relatives to work effectively.

What do those working on behalf of older people think about the report?

Gordon Morris, managing director of Age UK Enterprises, said: “The Dilnot commission report delivers a clear call to action to the financial services industry to work with government to develop the innovative products needed to fund long-term care. Existing products, such as equity release and annuities, could present a solution, but far more has to be done to build flexibility into these products to increase access and ensure these products evolve to meet changing financial needs.”

Debt charity the Consumer Credit Counselling Service (CCCS) warns that the cost of care in later life could still lead older people into debt because of accommodation costs if an older person needs to move into care accommodation.

The charity is particularly concerned about the impact of care costs on older people already struggling with debt. People over the age of 60 contacting CCCS for help last year owed an average of £24,642 on credit cards, personal loans and other unsecured debts.

But Stephen Burke, founder of United for All Ages, is critical of the complexity of the proposals and the benefits extended to richer people: “Under the commission’s regressive proposals, the winners would be richer families whose inheritance will be relatively protected, while most families will face a more confusing and potentially costly care system. The proposed cap on care costs will still result in some older people being forced to sell their homes to pay for care and related costs.

“The proposals aim to reform the current inadequate system for funding care. But they would lead to a more complex, fragmented and confusing care system … This could be seen as a care ‘poll tax’ for the so-called squeezed middle.”