This is part three of our series on planning and paying for long-term social care.
Part one [1] dealt with the gap between genuine need and available State provision.
Part two [2] 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 [3] 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 [4] 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 [5]. 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 [2].
(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:
[6]
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 [1] 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.
Wales
The single social care threshold means tariff income doesn’t exist here.
England
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.)
Northern Ireland
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.
Scotland
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 [7] 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:
[8]
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!
Income outcome
The income contribution formula is:
- Calculate eligible income [2]
- 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)
- Rent
- 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 [9]
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 [2].)
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.
Care bare
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 [10].
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.
[11]
Are you negotiating the social care system right now? In that case I can recommend the guidance on Money Helper [12].
Age UK’s social care factsheets are also superb. Here’s its coverage per region:
- England [13] (scroll to the social care section at the bottom)
- Northern Ireland [14]
- Scotland [15]
- Wales [16]
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 [17] 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 [18] to stress test them against social care scenarios.
Take it steady,
The Accumulator