Think your pension is your only old age cost? Think again

Retired coupleSaving for retirement is enough of a stress on the average person's finances, let alone saving for long-term care too.

Recognising this the government is reforming the care system, but don't be fooled into thinking that the cap on costs means you won't have to cough up for care.The government is bringin in major changes to care, the three main ones are: a £75,000 cap on costs, an increase in the mean-testing threshold to £123,000, and te introduction of a deferred payment scheme so no-one will have to sell their house to au for care.

These all make great headlines but as they say, the devil is in the detail.

Take the £75,000 cap on care costs. This cap only covers the cost of actually providing care, as determined by the local authority. It does not cover 'hotel' costs like accommodation and food. This means that you may be paying £600 per week for a care home, the local authority may judge the actual cost of just the care at £300 a week, meaning only £300 per week will count towards the cap.

The second part of the changes will help somewhat with the cost of care. The means-testing threshold for how much you have to pay towards care is currently £23,250. If you have assets over this amount you have to pay for your care but this will be increased to £123,000 so anyone with assets over this amount will have to pay for care up to the cap.

For those with assets under the cap, support will be given on a sliding scale until it reaches those with assets under £17,500 who will not have to pay anything towards care.

It's great that the threshold has been increased but when property is taken into account many people will find themselves over the threshold.

However, the government has said that no-one will have to pay for the cost of their care and can instead defer the payment of their care bill until after death when it can be settled, either by selling the property or by your family.

What part of the care bill can be deferred is unclear, does it cover the cost of accommodation costs or do families still have to fund this? The point is that saving for retirement no longer means getting a pension in order, it's working out how to pay for the extremely high cost of what could be very long-term care.

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