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Would you pass the "Means Test"?

Last month we looked at how Local Authorities assess care needs and the rules for deciding whether those needs are 'eligible'. This month I look at what happens if you have 'eligible needs', and how the Local Authority decide whether assistance with funding will be granted.

Let's start by looking at the minimum you can have before the means test becomes relevant. This describes the point at which the Local Authority will start to pick up your care costs.

Under the current system if you are in residential care you will have to pay all your income and, ultimately, all your assets towards your care, with the exception of:

  • 'Personal Expense Allowance' of £24.40 per week in England (£24.55 in Scotland and £25.00 in Wales); and
  • £14,250.00 in savings.

If you have any private income (i.e. not state benefits) or assets that are greater than this the Local Authority's Financial Assessment and Benefits (FAB) team will perform a means test to decide how much you should pay towards your care.

You should co-operate with the FAB team and provide accurate and up to date information. If you refuse to provide information you will be refused any assistance, and if you deliberately mislead the FAB team you may well be committing an offence.

The first question the FAB team will ask is "Do you have assets with a value of more than £23,250?" What counts as an asset is quite complex, and there are certain types of property that will be disregarded. For example, unless you are the sole owner of your home and are going in to permanent residential care your house will not be included in the assessment.

Bank accounts, ISAs, shares and most forms of investment are definitely included, but if you have more complex finances (for example if you run a business, or own buy-to-let properties) you should seek independent advice. There are regulations setting out how certain types of property should be assessed and the Local Authority has discretion as to how some assets are treated. If you own that type of asset you should consider asking the Local Authority to exercise their discretion.

However, the basic rule is that if you have assets with a value of more than £23,250 you will have to meet all your own care costs. Until the 'Care Cap' is introduced in April 2016 there is no limit on the amount you will have to pay towards your own care, so you will have to self-fund until your assets fall below £23,250.

If you have assets between £14,250 and £23,250 then the question of your income becomes relevant. You will be assumed to have a weekly income of £1 for every £250 of savings you have in excess of £14,250.

Example
If you have savings of £15,000 you would be considered to have an additional £3 per week to contribute toward your care costs. That will continue until your savings reduce to £14,750, at which point the assumed income would be £2 per week and so on until your savings are reduced to £14,250.

This 'assumed' income is added to any other regular payments you receive. The way your income is assessed depends on whether you are receiving care in your own home or in a residential setting.

If you are living at home the FAB team will ask you to tell them about all your sources of income, and outgoings such as council tax, utility bills etc. They will also take into account any costs specifically associated with your care needs (for example, you may have high transport costs because you have limited mobility). The FAB team will then calculate the disposable income you have that can be used to meet the costs of your care.

If you are in residential care all your income is considered available to meet your care costs with the exception of £24.40 per week (the 'Personal Expense Allowance'). If you have dependants or other demands on your income there are regulations setting out how the Local Authority should take them into account. As is the case for your assets, the Local Authority has discretion to disregard certain types of income or to increase your personal expense allowance to allow you to continue to support dependants.

There is one further complication with financial support from the Local Authority.

If you are 'self-funding' you can make your own care arrangements and negotiate the price of that care. If you receive money from the Local Authority they will not fund care at a higher price than they consider they could obtain it.

For example each Local Authority sets a maximum weekly price for a room in a residential home. In Somerset the County Council have set that maximum at £433.88 for 2014/2015.

If you want to go into a residential home that has a higher weekly cost, and you are reliant on Local Authority funding, someone else will have to sign a 'Third Party Top Up' Agreement. This is an open ended obligation on a friend or family member to make up the difference between what the Local Authority will pay and what the home charges. The Regulations state that even if your savings fall below £23,250.00 you cannot pay this 'top up' yourself and someone else must enter into a contract to fund the gap.

This change from self-funding to Local Authority funding can cause problems.

Example
You have been living for several years in a residential home that charges £600 per week for an en-suite room. Your savings have now dropped below £23,250 and your pension income is £400 per week.

The Local Authority will not fund a room with a value of more than £433.88 per week. You will need to move to a smaller room, or another home, or identify a friend or relative willing to make up the 'gap'.

I have only had space in this feature to touch on the basics of the Means Test system. It is a complex area and the rules will be changing significantly over the next couple of years.

You should consider seeking advice when planning for long term care once it becomes clear that you or a family member will require support. There are many organisations that provide information and support on this subject matter. We also offer a fixed price assessment that will consider your circumstances and whether (and, crucially, for how long) you will be self-funding. Please do get in touch if you think we might be able to assist.

Residential Home in Somerset Charging £600.00 per week

A B C D
Income £100.00 £300.00 £500.00 £300.00
Personal Expense Allowance £24.40 £24.40 £24.40 n/a
Savings £10,000 £20,000 £20,000 £40,000
Assumed Income £0 £23.00 n/a n/a
Resident's Contribution £75.60 £298.60 £600.00 £600.00
Local Authority Contribution £358.28 £135.28 £0 £0
Top Up Required £166.12 £166.12 Self-Funding Self-Funding

Notes

  • Somerset County Council (SCC) will not pay more than £433.88 per week for residential care
  • A & B both qualify for financial support but the gap between the maximum SCC will pay and the actual cost will have to be met via a 'Top Up'. SCC will not accept an arrangement where the gap will be met form A & B's remaining capital, so a third party will need to sign an agreement.
  • C's income is above the maximum funding level so C will be self-funding unless/until SCC set a weekly maximum above that level. C can make up the gap with capital but in the long term may need a third party to meet the additional cost.
  • D will be self-funding until the savings fall below £23,250 in just over a year, at which point D will be in a similar position to B.