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Partnership: more people prepared to spend down assets to avoid care costs

The number of people prepared to reduce their assets to avoid paying for their care has more than doubled over the past year, according to an index report.


19 AUGUST 2014 | BY JUDITH UGWUMADU

Elderly care ISTOCK

Retirement provider Partnership asked more than 4,000 consumers aged over-45 and almost 200 financial advisers to provide their views on care over a three-year period – 2012 to 2014. It revealed that in 2014, 41% said they would reduce their assets below the £23,250 threshold to ensure the government paid for the majority of their long-term care, compared to 23% from last year.

With around 150,000 entering care each year, this could see councils shouldering up to an additional £1.58bn burden in England if all those who say they intended to spend their wealth do so, the firm said.

Despite recent changes to care legislation, almost two-thirds (61%) of over-45s were still confused about how the system works, who funds it and how much it costs, said Thomas Kenny, head of technical pricing at Partnership.

‘With some viewing long-term care as a service that the state should pay for, you can see why they might think that they would rather spend their assets or give it to their families to avoid paying these bills.’

Councils in the South East (£330m) and North West (£240m) are likely to be most impacted due to the relatively high number of care homes in these regions. However, people in the East Midlands (53%), were more likely spend their wealth and fall back on the state for support.

Kenny continued: ‘However, reality is often very different from theory. Not only do 77% want the opportunity to live near their families if they go into care – not always an option for those the council funds – but 44% say they have not even thought about care so this type of forward planning is unlikely. 

‘However, when the new legislation comes into force, this is something that councils will certainly need to watch for.’

Kenny noted that there were far simpler ways of leaving an inheritance for those who were keen to do so.

‘This may involve the use of an immediate-needs annuity – the only financial product specifically designed to cover the cost of care which guarantees to pay an income to meet a person’s care fees no matter how long they live,’ he said.

The Care Act 2014 raises the threshold for means-tested support to £118,000 for people whose assets include property and £27,000 for people whose assets do not include property. The change will be introduced in April 2016.