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Conservative plans to include the value of people’s homes when they are means-tested for social care have been criticised for ushering in a ‘regional lottery’.
Social care emerged as a key battle ground for the election today with a Conservative party manifesto proposal to quadruple to £100,000 the amount of wealth an individual can have and still receive free visits.
However, for the first time that sum will include the value of property. With the average house in England costing £232,530 that means millions of elderly or vulnerable people could eventually find themselves paying huge bills for care before receiving government help.
Homeowners will be able to defer payments so 'no-one will have to sell their home in their lifetime to pay for care’, the Conservatives said.
‘We believe this powerful combination maximises protection for pensioner households with modest assets, often invested in the family home, while remaining affordable for taxpayers,’ the party added.
Calculations by pension provider Royal London show people in London and the south east of England would potentially face the biggest bills from the proposal.
Government figures showed the average house price in the capital was £471,742 at the end of March, meaning a person would pay £371,742, or 79% of the value of their London family home, before the government stepped in.
Elsewhere in the south east homeowners needing day-to-day care would pay an average of £211,514 or 68% of the typical property.
By comparison in Northern Ireland and Wales, where property prices are much lower, homeowners would on average pay £24,000 and £47,746 respectively, equal to 19% and 32% of the value of their homes.
Steve Webb, a former LibDem pension minister now policy director at Royal London, said: ‘If these changes are implemented, more families will be at risk of seeing a large part of the value of their home wiped out by care costs later in life.
‘Without an overall cap on care costs, those who need care for a long period of time could see more than half the value of their home taken by care bills. Paying for care looks set to become a regional lottery,’ he said.
Sir Andrew Dilnot, who recommended a £35,000 cap on care costs in a report for the coalition government in 2011, was disappointed the government was not allowing people to protect themselves against care costs.
‘People will be left helpless, knowing that what will happen if they are unlucky enough to suffer the need for care costs, is that they will be entirely on their own until they are down to their last £100,000 of all of their wealth, including their house,’ he told BBC Radio 4’s Today programme.
Labour leader Jeremy Corbyn accused the Tories of outlining a ‘tax on dementia’.
Richard Parkin at Fidelity International said the government’s shift to greater self-reliance by individuals came with a ‘welcome' reassurance that families would not have to sell their homes to pay for social care.
However, he said there needed to be more clarity on how equity release loans – which allow homeowners to release some of the value in their homes – and pension savings would work with the proposed scheme.
‘It seems there may be plenty of bear traps in the detail here though. How will government treat equity release debts in calculating value and how will unused pension pots be counted? Without a coherent policy there will be plenty of scope for arbitrage of the rules by the wealthy,’ Parkin said.
After much debate the Conservatives have decided to drop the ‘triple lock’ protection for the state pension by 2020, saying it would have served its purpose of uprating payments by then.
This is another difference from Labour which has said it would preserve the system which says the state pension will rise by a minimum of 2.5% a year, or higher if earnings or inflation are above this level.
‘We will keep our promise to maintain the triple lock until 2020, and when it expires we will introduce a new “double lock”, meaning that pensions will rise in line with the earnings that pay for them, or in line with inflation – whichever is highest. We will also ensure that the state pension age reflects increases in life expectancy, while protecting each generation fairly.’
In a manifesto big on pension policy the Conservatives also pledged to include the self-employed within the ‘auto-enrolment’ programme. In recent years this has got millions of workers saving into a personal pension and has been seen as a rare example of successful cross-party, retirement savings policy, first suggested by the Labour government and implemented by the Con-Lib coalition.
The document also stressed its commitment to helping younger people save and specifically mentioned the lifetime ISA which launched last month.
The party also said it would seek to protect workplace pensions from abuse by employers which are 'mismanaging pension schemes'. The Pensions Regulator (TPR) will have have the power to give out greater fines.
The manifesto also included a proposal to create ‘UK sovereign wealth funds’ which would be used to provide investment for infrastructure and the British economy. The Party said it would encourage pension schemes to join these investment funds.
The Conservatives pledged not to increase the level of value added tax (VAT) and to continue with the plan to cut corporation tax to 17%.
The party did not include a line on whether or not income tax or national insurance contributions could increase, which was a promise of David Cameron's 2015 election campaign.