This is part three of our series on planning and paying for long-term social care.
Part one dealt with the gap between genuine need and available State provision.
Part two explained how the means test values your assets (including pension and property) and when it excludes them.
Now we’ll consider what happens when you qualify for funding – and when you don’t…
Navigating the UK social care system is like being forced through a ramshackle Heath Robinson machine held together by elastic definitions and loopholes.
You’re propelled down different funding chutes in a process obscured by sooty clouds of subjectivity.
Depending on the outcome of your local authority1 financial assessment (the means test), you’ll end up in one of three buckets:
- Max funding
- Partial funding
- No funding
Even then, State funding only applies to your eligible care needs. Which may only bear some relation to the care you actually need.
A financial assessment divides your assets into capital and income, as covered in our previous post.
(Reminder: the social care definitions of capital and income diverge significantly from their familiar meaning.)
Your capital is tested against one set of social care thresholds. Income is scored against another.
Your social care funding can be docked to zero on either count.
The system may produce odd results, depending on how your finances are structured. And even if you fail initially, you may run down your resources and qualify later.
Let’s now examine how the two-stage means test crunches the numbers.
Social care thresholds for capital: test one
Test one compares your capital against these thresholds:
Above the upper threshold – you’re in the ‘no funding’ bin. At least, that is, until your capital expenditure sinks your assets below the threshold. Or you hit the social care cap in England. We covered the pitfalls of the cap in part one.
Even if you’re above the threshold, you’re still eligible for universally available support. (This includes free personal care in Northern Ireland and Scotland.)
Wales also caps care at home costs for your eligible needs.
Below the lower threshold – you qualify for local authority funding. But your level of income can still reduce or entirely eliminate your funding entitlement. We cover that in the social care allowances section.
Between the thresholds – This is the twilight zone. You qualify for funding, but some of your capital also counts as income. This mechanism acts as an extra counterweight, forcing your funding down as your assets rise.
This extra skim from your between the thresholds capital is called tariff income.
Tariff income between the thresholds
Tariff income is calculated differently across the home nations.
The single social care threshold means tariff income doesn’t exist here.
Your capital between £14,250 and £23,250 increases your means-tested income figure.
Your income increases by £1 per week for every £250 of capital you have between the £14,250 and £23,250 thresholds.
If your capital amounts to £14,500 then your income total is increased by £1 per week.
If you have £23,250 of capital then your income is up-weighted by £36 per week. (£9,000 / £250 = £36).
Your income ratchets by £2 per week if you have £14,501 in capital. That’s because any remainder is counted as a fresh £250 block.
Tariff income will be applied the same way for the new social care thresholds from October 2023. (Assuming they come in as planned.)
The same tariff income formula applies for residential care as in England.
Care at home is free, so tariff income doesn’t apply in this case.
Tariff income for residential care is calculated at the following rate:
Your income increases by £1 per week for every £250 of capital (or part of) you have between the £18,000 and £28,750 thresholds.
Tariff income for care at home is worked out differently:
Your income increases by £1 per week for every £500 of capital (or part of) you have over £10,000, if you’re above State Pension Age.
Your income increases by £1 per week for every £250 of capital (or part of) you have over £6,000, if you’re below State Pension Age.
There’s only one threshold here. This can catch out people who thought they were below the headline £18,000 threshold.
However, Scotland provides free personal care and nursing care for all. So the care at home means test applies only to chargeable services. Think housework and shopping (sometimes known as domestic assistance).
Intermission: get ready for the second test
Once tariff income is established according to your country’s rules, it is added to your other income to make the next part of the means test harder to pass.
Incidentally, the social care threshold table shows why it matters if your house falls into the means test.
Its value will catapult you beyond the upper thresholds. This immediately rules out local authority funding – unless and until you trigger any applicable social care cap.
Social care allowances for income: test two
Everyone must contribute something towards their eligible care needs, so long as they’re left with a minimal weekly income.
That’s true even if your capital falls below the lower social care threshold.
Your assessed income can wipe out any local authority funding you qualified for in stage one.
The level of weekly income that can’t be touched by fees is called the social care allowance. Here’s how much income you can keep:
This is the weekly income per individual that’s protected from social care fees.
The amount of local authority funding you receive is reduced by your remaining income above the relevant minimum that applies to you from the table. (For example, either £24.90 or £189 in England).
Apologies if you had to re-read that sentence twice to understand it. We didn’t write the rules!
The income contribution formula is:
- Calculate eligible income
- Add tariff income if capital is over lower threshold
- Deduct weekly social care allowance
- Remainder = your contribution to care that would otherwise be funded by your local authority
So if you weren’t eliminated at the capital stage, this second test could hobble you.
You can easily imagine someone with pension income – but little else – seeing most of it disappear on care fees. Even though their eligible capital is below the lower social care threshold.
In England, that could leave you with £24.90 per week (£1,294.80 a year) to call your own.
You do get to keep any income that’s disregarded. That’s typically State benefits.
What about housing costs and inflation?
A ray of light is that some housing costs should be deducted from your income before it’s checked against the Minimum Income Guarantee.
The definition of housing costs differs per region, but includes:
- Council tax (after housing benefit or other reductions)
- Mortgage repayments (England) or mortgage interest (Scotland)
- Ground rent (England)
- Water bills
- House insurance (Scotland)
There seems to be some discretion for local authorities to increase the Minimum Income Guarantee, particularly in Wales.2
Note, the Minimum Income Guarantee applies to care at home fees, not residential care.
Do the social care allowances rise with inflation? Well they’ve been frozen since 2015 in England. The link looks haphazard in the other home nations.
That’s a tax rise by any other name. But at least both allowances are due to rise in line with inflation in England from April 2022.
What if I run out of money?
You can re-apply for funding if your financial situation deteriorates.
You’ll need a new care assessment and financial assessment. You might now drop under the critical thresholds – especially if you’re funding your own care at home.
The social care guidance also mentions scenarios such as a large fall in the value of shares as a valid reason for reassessment.
If you’re facing a permanent move into residential care, consider a deferred payment agreement. This is designed to protect you from a forced sale of your home. (See our previous post on social care funding.)
Of course, fortunes can be restored as well as lost. An inheritance, for example, could cause you to bob back over the social care thresholds. You could then lose local authority funding.
The social care system is so convoluted that it’s probably best expressed in pictures and not words. And when I say picture, I don’t mean Edvard Munch’s The Scream.
I mean a diagram.
Our flowchart below boils social care funding down to its bare essentials. Hopefully it’ll help untangle all the ifs, buts, and maybes.
Start from the ‘Individual seeks help’ button.
Are you negotiating the social care system right now? In that case I can recommend the guidance on Money Helper.
Age UK’s social care factsheets are also superb. Here’s its coverage per region:
- England (scroll to the social care section at the bottom)
- Northern Ireland
Finally, a number of local authorities have online care cost calculators. These walk you through the means test steps I’ve covered in this post and the previous episode to estimate your social care fee contribution.
Google: social care financial assessment calculator + your local authority’s name to find yours.
Part four of the series shows how you can estimate a plausible cost of social care from available data.
You can then plug that number into your financial plans to stress test them against social care scenarios.
Take it steady,
This post covers allowances but it doesn’t cover attendance allowance?
Seems like an oversight since attendance allowance isn’t means tested, albeit only if you are having home care.
‘Attendance Allowance is extra money you can claim if you’re over State Pension age and need regular help with your personal care. It is non-means tested, so you can claim it whatever your income or savings.’
Attendance allowance was in the last post:
I’m focussing on the MIG and PEA in this one
I think thats a mistake. You talk about free home care in Scotland and NI in this article.
Attendance allowance is the equivalent in England and Wales.
You do not need to actually receive care in the home to be paid Attendance Allowance, provided you are assessed as needing help with personal care. (AA is a different application process from the care needs assessment that TA has already described for receiving care in the home or residential care.) The government guidance makes it quite clear that you are free to spend AA on anything that might make your life easier, e.g. taxis rather than buses to medical appointments. It continues to be paid if you go into a care home. It is not taxed or means tested and, as TA detailed in Part 2, is not included in the financial assessment.
As I understand it, Attendance Allowance is also payable in Scotland despite the different care rules there.
I kind of get you when you say you can spend it on anything you want, but you won’t get it unless you need personal care
Also it seems nuts to me to not discuss in a series of articles about social care the only assistance you can get that isn’t means tested, i.e. the only assistance most Monevator readers will get
Whether you can claim attendance allowance in Scotland and Northern Ireland idk
Wow! Another thank you for a conprehensive analysis of the complex topic. That’s really helpful. The diagram is great.
Makes the US system seem incredibly straightforward, I never thought I’d say that! There is no level of wealth that excludes people from our Medicare or Social Security pensions. There are additional safety nets available here but you’ve got to be extremely poor to qualify for them. Sounds like the best plan in either country is to self fund your retirement by saving 20% or more of your income and investing it in the stock market for a long time.
@steveark #7 Far be it for me to defend this byzantine ghastly mess, but I would say Medicare addresses what the NHS does for UK citizens, and Social Security pensions are the equivalent of our State Pension, which while it requires 35 years of NI contributions is not means-tested. So I’d say you’re not comparing like with like 😉
Before people interpret this great series as a counsel of despair, it’s worth bearing in mind that less than 1 in 5 of people over 85 end up in a care home – and of course you have to get to 85 first to take those odds…
Care isn’t entirely about care homes, of course, but that is where the really serious costs appear.
Again; thank you for this comprehensive analysis. It must have taken a not inconsiderable effort. I knew the “system” was complicated but now I have a headache. I’m awaiting the next post on this subject with some trepidation.
@Neverland (5) I agree with you in principle that to get Attendance Allowance you need personal care. My only experience of it in practice is that it is rather more effective and generous than other aspects of the care system. This experience comes from trying to get care for my late mother.
Initially what she really needed was the equivalent of the old Meals on Wheels service as she was lacking the energy and motivation to cook properly for herself. Social services could only suggest one private provider and it turned out that their coverage range just excluded my mother’s house. Social services did ask whether she had applied for AA, which we hadn’t done as we assumed she wasn’t eligible for it as she otherwise could manage without personal care. We filled in the very long form completely honestly and was rather surprised that she was awarded AA at the higher level.
She struggled on for about six more months without us finding any effective help for her needs, receiving AA all the while, before she finally entered a care home as a self-funder. Here AA was a useful albeit small contributor to the fees.
So for anyone trying to support a relative in finding care, I would encourage them to apply for Attendance Allowance as one of the first actions.
Yes, attendance allowance is available in Scotland and Northern Ireland.
It’s a good point that many Monevator readers could benefit from sources of universal support that are not means-tested. There’s a post covering those schemes and benefits later in the series, you lucky ducks.
@TA – many thanks.
But god this is complicated. Why do I think they’ve come up with this “system” just to protect little Johnnies inheritance? Granted, Labour had plenty of time to sort it but it’s more pressing now.
Luckily, I’m mid-50s and i’m sure they’ll have a better system in the next 20 or so years. Something like if you need residential care you’ll self fund until your assets reach £100,000. And if you insist, your house will be sold after your death to pay back the state and your heirs can split the what’s left. Simpler and fairer, surely?
Though I think I’d prefer Dignitas.
So that higher level of attendance allowance is now just under £400 per month – non means tested
Well worth having but its only if ‘If you need care or supervision during both the day and night, or if you’re terminally ill’
@Neverland (14) That’s the theory, but I can only repeat my own limited experience of helping my mother to apply. In her case the rules seemed to have been applied quite generously as we filled in the form completely honestly and, in my and her opinion, she fell short of the threshold you quote, but nevertheless she was awarded AA at the higher level.
@ Brod – it’s totally nuts isn’t it?
Can’t believe how complicated this all sounds. Presumably this audience is amongst the more financially astute in the population, and I’m sure I’m not the only one whose eyes have glazed over. But it’s a fantastic and eye-opening series of articles.
Just one typo in the flowchart – the first red box should say “dependant” not “dependent”. Hope that doesn’t void the copyright!
Thanks for spotting the speller Dave S. That was, er, for our American audience who just can’t get enough of the British social care system 😉
[Surreptitiously updates diagram while no-one is looking]
I’m with you on the brain overload. Even after writing these articles, I still find the system ridiculously convoluted.
I do fear that I’ll be testing everyone’s patience as this series continues. Once I got into it, I found I couldn’t do justice to the material or the implications of it in less space. It seemed best to press on and just have the posts out there for anyone who needs them.
Attendance allowance is only £400 a month, the cost of my mothers live in carers is £4,800 per month as she has Alzheimer’s.