30 May 2017

'Meaningful' care cost cap needed to prevent big regional winners and losers from proposed reform - Royal London

6 min read

Steve Webb
Royal London



New analysis by mutual insurer Royal London has found that without a meaningful cap on social care costs, there could be huge regional winners and losers from the proposed reform to the funding of social care.

The analysis is based on the assumption that a new government would:

  • Raise the limit for help with social care costs in England from £23,250 to £100,000;
  • Include the value of a family home in the means-test for home care;
  • Include the value of a family home in the means-test for residential care, even if a spouse was still living in the family home1;

The calculation looks at what would happen if one member of a couple went into residential care and then the second member of the couple also subsequently needed residential care. It is based on an average stay in residential care of 130 weeks and uses average weekly care costs in each English region plus Wales and Northern Ireland. The analysis then looks at:

  • What percentage of someone’s home in each region would be spent on care based on current rules;
  • What percentage of someone’s home in each region would be spent on care based on the proposed reformed rules but without any overall cap (as this has not yet been set).

The key findings are:

  • In areas with relatively low house prices, allowing families to protect £100,000 of their assets means that state support cuts in before care costs have become substantial; as a result, people living in lower house price areas tend to gain from the reform;
  • In areas with high house prices, the fact that care costs for two adults may now be set against the value of a house means that a high proportion of the house value can be taken up before state help is available;

The results for Wales, Northern Ireland and each English region are illustrated in the chart and shown in the Table. The table shows that:

  • Unless an overall cap is introduced, families in southern England and the Midlands would face higher bills; in the East of England the maximum cost of care could rise from 30% of the price of the average home to 60%;
  • The £100,000 floor has no impact in the highest house price areas – London, the South East and the East of England; we estimate that total amounts spent in care would range from £163,000 to £174,000 in these regions;
  • In the more northerly regions of England plus Wales and Northern Ireland, care home bills would fall; the largest fall is in the North East, where the proportion of the value of a family home taken up in care bills would fall from just over half (52.8%) to under one quarter (22.3%).
Max care cost table

Table: Average care home costs before and after proposed reform of social care funding as percentage of average house values in each English region plus Wales and Northern Ireland

  Before  After
East of England 30.4% 60.9%
South West 30.9% 58.8%
South East 27.5% 55.0%
London 16.9% 33.7%
West Midlands 37.9% 44.9%
East Midlands 38.6% 43.4%
North West 40.2% 34.3%
Yorks 43.0% 35.5%
Wales 45.4% 32.5%
N Ireland 50.0% 20.3%
North East 52.8% 22.3%

Note: These calculations2 assume two partners, both needing an average spell of residential social care in later life.

Commenting, Royal London Group Head of Protection Strategy, Debbie Kennedy said:

The plan to allow families to protect the last £100,000 of the value of their home makes a big difference in low house prices areas. But in places like London, the South East and the East of England, the floor will be of little practical benefit. Care costs of well over £150,000 can be incurred by the average home-owner in these regions without being entitled to any state support. If the proposed reform package is to avoid creating huge regional variations, a meaningful cap on maximum payments will be needed.

- ENDS -

For further information please contact:

Royal London Press Office

About Royal London:

Royal London is the largest mutual life, pensions and investment company in the UK, with funds under management of £117 billion, 8.8 million policies in force and 3,745 employees. Figures quoted are as at 30 June 2018.