Three quarters fear having to sell home to pay care fees – there is one alternative | Personal Finance | Finance

More than three quarters of over-45s see this as a real danger because local authority support in England is means tested and councils will only step in once assets fall below £23,250. That’s an incredibly low level and even then councils only offer partial support.

All assets including savings, investments and the family home are subject to council means testing and a property sale may be the only way to raise the necessary funds.

In practice, nobody can be forced to sell their home to pay for care, something less than one in four of us realise, according to new research from retirement specialist Just Group.

Unfortunately, the alternative isn’t much better.

English councils may grant care users a deferred payment agreement (DPA), which is a loan against their home to cover care costs. All this does is defer the inevitable, as the debt is cleared when the property is sold after they die.

The DPA prevents a forced sale but it will still deplete inheritances in exactly the same way.

DPAs are the government’s way of delivering on its promise that nobody has to sell their home to pay for care during their lifetime, said Stephen Lowe, group communications director at Just.

“Politicians don’t want to be accused of forcing older people to sell up but the public are savvy enough to know that is exactly what may happen,” he says.

Lowe said the complex care funding system is a major problem as it deters people from planning ahead. Most people know that long-term nursing or residential home care can be eye-wateringly expensive. What they don’t know is how the system works or what future care costs they may face.”

Residential care fees for self-funders average more than £50,000 a year, according to Laing & Buisson. That kind of money quickly destroys wealth and widens the rich-poor divide.

In England, anyone with assets worth more than the upper capital limit of £23,250 must cover all of their care costs. They only get full support once assets fall below the lower capital limit of £14,250. These figures have been frozen for 13 years. 

There is one potential way round this though.

While the value of any home you own, either wholly or jointly, counts as capital after 12 weeks of care, it may be exempt if certain people still live there. 

These include your husband, wife, partner or civil partner, and a close relative who is 60 or over, or incapacitated. 

It may also include a close relative under the age of 16 who you are legally liable to support, and a former spouse or civil partner who is a lone parent.

If any of these apply to you, it could spare your savings and your home, so check carefully. The government-funded Moneyhelper site has useful info.

Your home is still treated as capital if you rent it out but the income is ignored for the purpose of the means test. You could choose to pay the income to the local council to reduce your debt if you have a DPA

If you have savings or investments above the £23,250 means test threshold, your local authority would expect you to use them up before granting you a DPA.

READ MORE: Inheritances wiped out as social care costs rocket – we need a dementia tax

Lowe said DPAs are quite rare and more than half of Britons say they wouldn’t use them. “There are about 160,000 self-funders in care homes but NHS figures show that only 2,605 new DPAs were agreed during 2020/21 tax year.”

It’s hardly surprising that people avoid using them if they can.

The care system is due to be reformed, but politicians have repeatedly kicked the can down the road. They know that any changes will be hugely controversial.

Plans to lift the upper capital limit to a more generous £100,000 and the lower limit to £20,000, with a lifetime cap of £86,000 on costs, were due to come into force in October but postponed after being derided as a “dementia tax”.

Lowe called on politicians to tackle this issue. “Reforms are urgently needed because people need to be clear what the state will provide in the future and what responsibilities they must bear themselves.”

He said the issue is too important to ignore any longer and called on politicians to set out their plans in the upcoming election. “People need some certainty so they can stop fearing the future and start planning for it.” 

Voters also need to accept that this is a difficult area with no easy answers. Funding care will never be easy but the system should be much clearer than it is.