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Inheritance 'stealth tax' to fund care for the elderly
The Government will fund plans to assist pensioners with care bills by imposing a £95,000 “stealth tax” on inheritance.
Ministers will claim that the new social care funding system will offer 'unprecedented' financial support for elderly people. Photo: GETTY
By Peter Dominiczak, Political Correspondent
9:22AM GMT 10 Feb 2013
945 Comments
The Treasury is set to freeze the amount that people can inherit free of tax instead of increasing it in line with inflation.
The allowance will be frozen at £325,000 despite George Osborne, the Chancellor, just eight weeks ago saying that he would increase the amount in two years.
The rate will now not go up until at least 2019, according to The Sunday Times, meaning that thousands of families will be £95,000 worse off than if the allowance had risen.
The measures would see 5,000 more people paying inheritance tax and are expected to contribute about £1 billion over the next five years towards the cost of care home bills for the elderly.
Under those plans pensioners with savings of up to £123,000 are to receive state support with their care costs under Government plans.
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In a long-awaited coalition announcement, Jeremy Hunt, the Health Secretary, will say that the assets threshold will rise from £23,250 to £123,000, with a sliding scale of support.
The means-tested threshold is higher than the £100,000 assets limit recommended by the independent Dilnot Commission appointed by David Cameron to make recommendations on the highly-fraught issue.
But the cap on costs that people have to pay for care is expected to be set at £75,000 – more than double the £35,000 economist Andrew Dilnot suggested.
The £75,000 figure is based on 2017 prices – when the reform will come in – meaning that in today's money it will be about £61,000.
Pensioners will still be required to meet accommodation costs for care home stays, which will be limited to £12,500 a year.
The package is expected to cost the Treasury £1 billion a year by 2020, significantly less than the £1.7 billion figure raised by the Dilnot Commission and resisted by Mr Osborne.
Up to 40,000 people a year currently face having to sell their homes to afford care bills, such as help with washing, dressing and feeding themselves – a situation repeatedly condemned by the Prime Minister when he was in opposition.
Ministers will claim that the new social care funding system will offer “unprecedented” financial support for elderly people and that it is being set at the right level given the continuing pressures on the public finances.
The £75,000 cap will apply to every pensioner. If both husband and wife end up moving into residential care, it could mean they will have to pay up to £150,000 before the state steps in.
Based on an average care home stay of two years, this means a couple could still spend £200,000 on fees for a basic care home.
Under the new system, once a care home resident has spent £75,000 on fees, the state will step in and pay the basic rate for any more care required.
Before that point, it will also protect some assets and savings.
When a pensioner’s assets are drained down to £123,000, the state will meet some of the costs of care. Just the last £14,000 of savings are expected to be fully protected, as in the current system.
Once the state steps in, it will only pay for basic care, which will not necessarily meet the standards that the resident was previously paying for.
If pensioners are paying bills for care homes which are higher than the rates that councils will pay, they could be forced to move to cheaper institutions or to seek family help to pay “top-up” fees.
Ministers will also claim nobody will be forced to sell their home in their lifetime – with everyone given the right to defer paying until after their death.
The Government will fund plans to assist pensioners with care bills by imposing a £95,000 “stealth tax” on inheritance.
Ministers will claim that the new social care funding system will offer 'unprecedented' financial support for elderly people. Photo: GETTYBy Peter Dominiczak, Political Correspondent
9:22AM GMT 10 Feb 2013
945 Comments The Treasury is set to freeze the amount that people can inherit free of tax instead of increasing it in line with inflation.
The allowance will be frozen at £325,000 despite George Osborne, the Chancellor, just eight weeks ago saying that he would increase the amount in two years.
The rate will now not go up until at least 2019, according to The Sunday Times, meaning that thousands of families will be £95,000 worse off than if the allowance had risen.
The measures would see 5,000 more people paying inheritance tax and are expected to contribute about £1 billion over the next five years towards the cost of care home bills for the elderly.
Under those plans pensioners with savings of up to £123,000 are to receive state support with their care costs under Government plans.
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10 Feb 2013 - Savings boost for pensioners in care shake-up
09 Feb 2013 - Inheritance 'stealth tax' to fund elderly care
09 Feb 2013 - Social care cap to be set at £75,000
08 Feb 2013 - Health and social care will need half of Government spending unless changes made: King's Fund
31 Jan 2013
In a long-awaited coalition announcement, Jeremy Hunt, the Health Secretary, will say that the assets threshold will rise from £23,250 to £123,000, with a sliding scale of support.
The means-tested threshold is higher than the £100,000 assets limit recommended by the independent Dilnot Commission appointed by David Cameron to make recommendations on the highly-fraught issue.
But the cap on costs that people have to pay for care is expected to be set at £75,000 – more than double the £35,000 economist Andrew Dilnot suggested.
The £75,000 figure is based on 2017 prices – when the reform will come in – meaning that in today's money it will be about £61,000.
Pensioners will still be required to meet accommodation costs for care home stays, which will be limited to £12,500 a year.
The package is expected to cost the Treasury £1 billion a year by 2020, significantly less than the £1.7 billion figure raised by the Dilnot Commission and resisted by Mr Osborne.
Up to 40,000 people a year currently face having to sell their homes to afford care bills, such as help with washing, dressing and feeding themselves – a situation repeatedly condemned by the Prime Minister when he was in opposition.
Ministers will claim that the new social care funding system will offer “unprecedented” financial support for elderly people and that it is being set at the right level given the continuing pressures on the public finances.
The £75,000 cap will apply to every pensioner. If both husband and wife end up moving into residential care, it could mean they will have to pay up to £150,000 before the state steps in.
Based on an average care home stay of two years, this means a couple could still spend £200,000 on fees for a basic care home.
Under the new system, once a care home resident has spent £75,000 on fees, the state will step in and pay the basic rate for any more care required.
Before that point, it will also protect some assets and savings.
When a pensioner’s assets are drained down to £123,000, the state will meet some of the costs of care. Just the last £14,000 of savings are expected to be fully protected, as in the current system.
Once the state steps in, it will only pay for basic care, which will not necessarily meet the standards that the resident was previously paying for.
If pensioners are paying bills for care homes which are higher than the rates that councils will pay, they could be forced to move to cheaper institutions or to seek family help to pay “top-up” fees.
Ministers will also claim nobody will be forced to sell their home in their lifetime – with everyone given the right to defer paying until after their death.
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