The Postponement of the Proposed Cap on Social Care Costs


Author Dave Robinson (FCCA APFS MCSI TEP LLAA IMC), Founder of Centurion Chartered Financial Planners


In September 2021, the Government announced that, from October 2023, it planned to introduce a new £86,000 cap on the amount anyone in England will have to spend on personal care over their lifetime and that this cap was going to apply universally, a person’s age or income.

The Chancellor has now announced that the introduction of the Cap is going to be postponed for two years until October 2025.

This is probably not a surprise but to be honest the postponement is very unlikely to cause much financial detriment to many care service users or their families. This is because the introduction of the Cap in its proposed form, if it ever happens, is very unlikely to save many people much money, for several reasons which are outlined below.

The Cap in practice

Firstly, only money spent on meeting a person’s personal care needs will count towards the Cap. Any amount spent on daily living costs (commonly referred to as “hotel costs” in a care home) is not included. In November 2021 the Government announced that daily living costs will be set at a fixed amount of £200 per week, thus whatever amount was actually paid to a Care Provider £200 per week was not going to be counted.

Furthermore, the Cap was never going to apply retrospectively, so any costs accrued before October 2025 will not count either.

The Government also proposes to make the following changes to the capital means test:

  • To increase the upper capital limit from £23,250 to £100,000. Only when a care service user’s assessable capital falls below this value is a local authority contribution likely to become available.
  • To increase the lower capital limit from £14,250 to £20,000. Only when a care service user’s assessable capital falls to this value will they not have to make any further contributions out of their capital (but they may still have to out of their income).
  • To leave the “tariff income” provisions as they are. This means that if care service user owns assessable capital between £20,000 and £100,000, they will be required to contribute £1 per week for every £250 in capital they have between the two thresholds. Effectively this calculation assumes people can earn a return of £52 a year on £250 of capital, which is an assumed return of 20.8% per annum. This is far higher than anyone is ever likely to earn, even by investing their money in an extremely risky way.

We calculated the financial effect which the proposed Cap will have on an average person paying average fees in an average care home in the UK. We concluded that, taking all of the proposed changes into account and assuming that care home fees continue to increase at a rate of 6% per year:

  • A care home resident will only reach the £86,000 cap when they have spent over £180,000 of their own money (plus any money they have already spent prior to October 2025). They will almost certainly now spend more because the Cap has been postponed.

  • Someone is only likely to see any financial benefit at all from the new proposals if they live in a care home for over 4 years. In June 2021, The Office for National Statistics published figures showing that the average length of stay in a Residential Care Home is around 4.4 years. If one took a cynical view, one could perhaps think that the Cap was introduced simply so that the Government could claim some political goodwill, without having to spend much money at all!

  • Even if they live long enough to hit the cap, they will still have to meet the difference between what the home will charge and what their Local Authority will be legally obliged to pay. At that point they are still likely to have to pay around £2,000 per month.   

  • They will have to keep paying a monthly contribution, until the value of their assessable capital falls below £20,000.

  • Even if the value of their assessable capital falls to £20,000, their income will still be assessable. If they haven’t reached the Cap they will still have to contribute out of their income. We think they will be allowed to keep about £125 per month to meet personal expenses but the rest of their income could still be taken to help meet the cost of their care.

The only positive aspect of the postponement is that it will at least defer what will be a very significant administration, and therefore cost, burden from hard stretched local authorities for another two years. Hopefully that will enable them at least to divert more resources into providing care rather than administering for a little while longer.

The crucial point is the costs that Care Service Users will incur in meeting the cost of care is going to be very substantial whether or not the Cap is ever introduced.  The implications of residents running out of money are obvious for both them and for Care Providers.

Specialist financial advice can protect both users financial independence and freedom of choice, and Care Providers cashflow. We have produced a short Guide to the Basics of Care Fees Planning which aims to explain the key issues involved.

If you would like a copy to distribute to your residents, please contact us.