18 June 2013
Senator Francis Le Gresley has explained how the new Long Term Care scheme will work, if approved by the States. It was approved in principle in 2011 and the proposed scheme will limit the maximum amount that anyone will have to pay for their long term care to £50,000.
This will put an end to the current uncertainty for homeowners and their families when faced with unknown and potentially very significant care costs.
Moving into care can be distressing for all concerned and the new scheme aims to remove many of the financial worries that can occur at this difficult time.
Once the cap of £50,000 is reached, the ongoing care costs will be met from a new ring- fenced fund.
The proposed scheme will also protect home owners. The value of the family home up to the average value of a two bedroomed house – currently £391,000 - will be excluded from any assessment, as well as at least £25,000 of other savings.
This means that families who are “asset rich, cash poor” will be able to receive help with their care costs and the family will always retain at least £416,000 in assets. A similar exemption will apply to the savings of people who do not own their own home, so they will be able to pass on the value of any “nest egg” they have built up.
Those whose household assets, including the family home, amount to more than £416,000 will not need to sell their home to meet the costs of their care. Instead they will be able to access a loan from Social Security, secured against their property and repayable when the home next changes ownership. For those with household assets of less than £416,000 the fund will meet all care costs to the extent that their income cannot cover the care costs.
In addition to the costs of care, fees levied by residential and nursing care homes include the costs of accommodation and other day to day living costs.
People receiving care in a care home will make a separate co-payment of £300 per week towards their accommodation and living costs throughout their time in care. Those receiving care in their own home will already be covering such costs and will continue to do so and not need to pay the £300 co-payment.
Those who cannot cover their living costs will receive support on a means tested basis from the LTC Fund.
This new support will be available from 1 July 2014. It will be accessible to all adults in Jersey who have been resident for a continuous period of 10 years at any time as an adult, and who have been living in Jersey for the year immediately before needing care.
Contributions into the Fund will be collected, on behalf of the Social Security Department, by the Taxes Office from 1 January 2014 from all local residents who pay income tax, including pensioners. No new administration processes will be required by employers.
The initial headline rate for the LTC contribution will be 1%, which is less than the previously suggested rate of 1.5%. The initial 1% rate will be fixed for at least five years.
The rate will be applied to all earned and unearned income up to the Social Security Upper Earnings Limit of £152,232 per annum. Existing income tax allowances, thresholds and marginal rates will be used to calculate the long-term contribution liability. This means that the effective rate for the vast majority of contributors will be well below the headline rate of 1%, just as the vast majority of taxpayers pay an effective income tax rate of less than 20%.
In addition to the new contribution, existing budgets of the Health & Social Services and Social Security Departments used to fund care costs, circa £33m, will be paid into the Fund on an annual basis.
Senator Francis Le Gresley said “The Island faces a substantial increase in the number and proportion of older residents over the next 30 years. Care costs are predicted to more than double by 2044. At the same time, taxpayers will be funding the growing costs of health, social care and pensions.
“I have been working with colleagues in Health and Social Services and the Treasury to introduce this new benefit which will help islanders with very high care costs, while also protecting home owners and ensuring that we keep control of the impact of these costs on future generations.”
Senator Le Gresley added “I believe this proposal shares the responsibility for care costs fairly between individuals who are receiving care and the general public who will pay into the long-term care fund.
“Sharing the costs means we can introduce the scheme in 2014. People needing care will no longer need to worry about paying hundreds of thousands of pounds in care costs and everyone will be able to plan with greater certainty for future care costs, by setting aside savings. Providing certainty in respect of the maximum standard care costs should allow a market for insurance products to be developed as in the UK where the government has proposed introducing a cap of £72,000."
These proposals have been published in outline form to update States Members and other interested people on the development of the scheme and to provide notice in respect of the new contribution charge. A formal report will be published in July and a States debate is planned for September.
Existing support with care fees is available through the income support scheme and anyone with concerns about care fees should contact the Social Security Department on 445505 or at email@example.com
Information on the current scheme and the new proposals is also available online
The scheme in brief
- the new benefit will be funded by contributions from all taxpayers, from January 2014
- the contributions will be set at 1% - less than the original estimate of 1.5%
- the contributions will be collected by the Taxes Office, acting as the agent for Social Security
- the money collected will be placed into a separate, ring-fenced fund – this means the money can only be used to fund long-term care
- the maximum anyone will have to pay for care at the standard rates set by the Department will be £50,000
- if care costs rise above £50,000, all future long term care costs will be met by the benefit, from the ring-fenced fund
- anyone living in a care home will need to pay approximately £300 per week towards their accommodation and living costs – this does not count towards the cap of £50,000
- anyone being looked after at home will continue to pay their own accommodation costs
- for those who cannot afford their care costs up to the value of the cap and/or the accommodation co-payment, means tested support will be available