With an increasing population aged 65 and over1 and higher proportions of individuals self-funding2 both at home care and in care homes, advice in relation to long term care funding is becoming more and more common.
Average costs are eye watering with residential care for a whole year (52 weeks) costing an average £65,832. This article looks at how different types of wealth on the Quilter platform is (or is not) included within the assessment of whether any local authority funding is available.
General guidelines
The Care Act 2014 maps out the process of assessment, charging, establishing entitlement, care planning, and the provision of care and support. This process determines whether individuals need to pay for their own care or receive support from their local authority.
Since the Care Act 2014 came into force, where a person has eligible needs, the local authority has the discretion to choose whether or not to charge under section 14 of the Care Act. If it charges, it must follow the Care and Support (Charging and Assessment of Resources) regulations and have regard to the Care and support statutory guidance: https://www.gov.uk/government/publications/care-act-statutory-guidance/care-and-support-statutory-guidance#charging-and-financial-assessment
The financial limit, known as the ‘upper capital limit’, exists for the purposes of the financial assessment. This sets out at what point a person is entitled to access local authority support to meet their eligible needs. The upper capital limit is currently set at £23,250. Below this level, a person can seek means-tested support from the local authority.
Where a person’s resources are below the lower capital limit, set at £14,250 currently, they will not need to contribute to the cost of their care and support from their capital. However, for adults receiving care and support in locations other than in a care home the limits of £23,250 and £14,250 are simply minimums and local authorities have discretion to set their own higher capital limits if they wish, provided they are no lower than £23,250 for the upper limit and £14,250 for the lower limit.
A person with assets above the upper capital limit will be deemed to be able to afford the full cost of their care. Those with capital between the lower and upper capital limit will be required to make a contribution from their capital. Any capital below the lower capital limit should be disregarded.
Where a local authority has chosen to charge, it must financially assess that person's income and capital.
Financial assessment - treatment of Quilter products
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Collective Retirement Account (CRA)
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As a defined contribution scheme, the guidance confirms that ‘if a person is only drawing a minimal income, or choosing not to draw income, then a local authority can apply notional income. This must be the maximum income that could be drawn under an annuity product. If applying maximum notional income, any actual income should be disregarded to avoid double counting.
Alternatively, if a person is drawing down an income that is higher than the maximum available under an annuity product, the actual income that is being drawn down should be taken into account.
This assumes the individual is at least of state pension age.
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Individual Savings Account (ISA)
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The full withdrawal value of the ISA would be taken into account for the purposes of the capital assessment.
Income earned within the ISA should be treated as capital from the date it is normally due to be paid.
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Collective Investment Account
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Identical to the ISA, the full withdrawal value would be taken into account for the purposes of the capital assessment.
Income earned should be treated as capital from the date it is normally due to be paid.
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Collective Investment Bond |
The guidance specifically addresses investment bonds:
‘Where an investment bond includes one or more elements of life insurance policies that contain cashing-in rights by way of options for total or partial surrender, then the value of those rights must be disregarded as a capital asset in the financial assessment.’
The guidance states that certain capital payments should be treated as income. This includes ‘capital paid by instalment’. An existing regular withdrawal facility from an insurance bond is likely to be included as income for the purposes of assessment.
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Deliberate asset deprivation
Deliberate asset deprivation describes:
- the deprivation of capital in order to avoid or reduce care and support charges
- the deprivation of income in order to avoid or reduce care and support charges
Annex E specifically highlights examples of how individuals, before entering accommodation, could deprive themselves of assets.
Examples of deprivation include an investment into a bond where the motivation of the investment was an increase in the payments from a local authority. Placing assets into trust is also highlighted as a possible method of deprivation of capital.
The guidance would imply that if withdrawals from an investment bond were terminated (where possible) before entering care, these payments would not form part of the assessment, although careful consideration needs to be applied on this point to ensure that the significant motivation for ceasing withdrawals is NOT to increase the local authority payments. This would apply to personally owned bonds as well as bonds held in trust for the settlor's benefit or where an interest is retained such as a discounted gift trust.
If a local authority decides that a person has deliberately deprived themselves of assets in order to avoid or reduce a charge for care and support, they will need to decide whether to treat that person as still having the asset for the purposes of the financial assessment and charge them accordingly.
Summary
Clearly there is a need for advice in this specialist area. As highlighted above, planning options immediately before entering accommodation are limited and could impact any financial assessment now and in the future.
1 (16.4% 2011 to 18.6% 20211) Profile of the older population living in England and Wales in 2021 and changes since 2011 - Office for National Statistics
2 37%2 in care homes Care homes and estimating the self-funding population, England - Office for National Statistics and 23.5% in home care Estimating the size of the self-funding population in the community, England - Office for National Statistics