Following Dilnot - self payers still pay 90% of all their care costs in many quality care homes costing them nearly £200,000 if they live for 4 years – warns partnership
Partnership, the UK’s largest provider of Long Term Care annuities, calls for greater awareness of the true impact of Dilnot’s proposals for the funding of care and support for self funders for care.
Proposals will not include “hotel costs” which are typically 2 or 3 times as large as personal care and nursing costs taken together.”
Partnership’s policyholders, who live on average for 4 years2, and live in quality care homes, may have to meet 90% of the costs of residential care that they already pay. Partnership’s policyholders may still have to find nearly £200,0003.
12% of Partnership’s policyholders will live for 8 years or more – resulting in substantial on-going costs to meet their residential care fees4.
Proposals may be lost in the “medium grass”. Proposals, if they are accepted, will not be implemented in legislation until 2013 earliest. This means Dilnot’s proposals will have no benefit for the average person in residential care, who live for just over 2 years and are likely, if they are self payers, to meet all their care costs themselves5.
Immediate Needs Annuities are the only Long Term Care insurance product which have been designed specifically to guarantee income to help meet the costs of care for life.
Chris Horlick, Managing Director of Care at Partnership said: “There is a significant danger, that Dilnot’s proposals may have inadvertently lulled self payers* into a false sense of security.
“Many may believe that the Government will pick up all their care costs once they have paid the first £35,000 of their social care costs. However this is simply not the case!
“The Government will only meet social care costs and not hotel costs and general living costs. This is fundamental as these costs are “typically two or three times as large as personal care and nursing costs taken together**6.”
Others may also think that their contribution to hotel costs is limited to ‘general living costs’ of £7,000 to £10,000 a year. However typical fees for many quality care homes can be nearly £50,000 p.a7.This exceeds significantly the standard allowed by local authorities - requiring individuals to top up the difference from other sources. Few consumers appear to be aware that they will have to meet these additional costs and are unlikely to plan for them!
Partnership estimates that were Dilnot’s proposals implemented in full, one of our typical policyholders (who will on average live for 4 years) in a quality care home will still have to meet 90% of the costs of residential care that they already pay.
The potential value of financial advice in this arena is clear. An individual with care costs of £1,000 a week will pay £208,000 under the current system if they live for 4 years, the average life expectancy of a Partnership Care Annuity customer. Under the new system, they would still pay £189,000 over the 4 years.
Horlick also warned that ‘another potential area for confusion is how much social care will cost.
“Many may believe that if you have paid for care services – all you do is submit a receipt to the local authority and once you have reached the proposed £35,000 threshold they will pay for the rest. They will not. Local authorities will make an estimate based on the ‘notional amount’ it would have cost them to provide this care service for one of their maintained residents in a basic home. This may be far less and you may spend far more than £35,000 as you seek to reach the threshold.
“Also, if all of your care needs are being currently met, for example from a member of your family – then if those needs are currently not paid for by local authorities, they will not be paid for in the future.”
“Self-payers must also remember that even if these proposals are accepted in their current form, then they will not be introduced until 2013 at the earliest,” cautioned Horlick.
“Those currently in residential care with an average life expectancy of 2 years 3 months8 could well receive no benefit.
“Many people going into care now – may think that Dilnot’s proposals will act as a safeguard for them. For most they will not. They will need financial advice immediately if they are not to risk losing significant amounts of capital and income.”
“There is only one product which has been designed specifically to help meet the costs of care for life, which is the Immediate Needs Annuity, paying an income for life in return for a one-off premium. Should the rules change the product already has a feature that allows any excess income no longer required to meet care costs to be diverted to the individual.”