We have a problem here in the UK of a large population of elderly people in need of care that is so expensive many people have to resort to selling their homes to pay for it. Now new orders by the Government could go some way to relieving the pressure of paying care home fees. On the 17th of July this year the Government decreed that all councils are now obligated to offer a loan to every elderly person going into a care home.
New accessibility measures for an existing loan scheme
The Government covers the cost of care for anyone whose assets are below £23,250 in England, £23,200 Wales and £24,740 in Scotland (including the value of their home). The loans scheme is designed to help those not poor enough to qualify and not wealthy enough to pay upfront for their care.
Although loans were already available from local authorities they weren’t widely advertised. Councils will now have to make sure anyone considering residential care is aware of all their funding options, including these loans. This will be done by arranging for financial advice meetings and by actively offering the loan to candidates.
The loans should have already been available to everyone but the Department of Health says that some councils were rejecting people based on age or assets. If the council felt the applicant had sufficient assets to pay for their care they were refused the loan. This is exactly the reason why many people felt forced to sell their homes in order to pay for care. The Government now requires councils to offer a totally inclusive loan scheme.
Another change to this scheme is the introduction of interest on the loans. These loans have previously been interest free. Now councils will be allowed to charge interest on the repayments, helping to cover the cost of the loans.
The question of how councils will find the cash for these loans is in itself an issue. The Government have pledged an extra £355 million to help ease the strain on council budgets. Considering that in 2012, when only 8,500 loans were granted, it cost councils in England £197 million, it’s easy to see how £355 million may not go very far to covering the total cost of these potential loans. The number of additional loans is estimated to be ‘a few hundred thousand’ according to ministers in the know.
Compounding this problem is the knowledge that the existing funding allocation of councils will in fact be reduced by 10% in a general sweep of cuts that’s forms part of the Government’s austerity measures. This means the new money will likely be eaten into even before a rise in the number of loans issued occurs.
Thus ensuring the loans are repaid and that some of the costs are recouped through interest charges is paramount to the councils themselves. Repayments will be deducted from anything left behind by the recipient of the loan after they die. This should come as a relief for those people who would otherwise be forced to finance their care by other means during their lifetime.
These changes, which are part of a larger Care Bill, aren’t set to come into force until 2015. However as loans are currently in existence it is worth pursuing now if your council has failed to make you aware of the scheme.
In the previous week the Government also announced its firm plans to introduce a cap on care home fees over the lifetime of the resident, due to come into effect in 2016. The count for contributions to care will be taken from the date the cap comes into effect (sometime in April 2016).
Despite the cap coming in a year after the loans scheme is set to be more strongly enforced recipients of loans should still benefit from the cap. The loan scheme will be added to on a weekly basis, rather than a lump sum at the time the loan is granted so they’ll have the same footing as another person not in receipt of a loan.
Apart from the strain on council budgets there are other worries about the effect these loans could have.
For one, the loan won’t protect the property of the loan holder once they die. Many people are reluctant to sell their homes to fund care home fees because they want to leave the house to their children. Unfortunately repayment of the loan has to come from somewhere.
Bradford’s Older People’s Alliance are also worried that thinkers behind the schemes aren’t considering the practicalities of offering loans that apparently protect the elderly person’s home. Its chairman, Jean Walker, questions what will happen to the so called ‘protected’ house will the owner lives in a care home? The end result will always be that upon death the person estate will be used to repay the loan so all in all is this just a scheme that prolongs the inevitable?