The Conservative Manifesto: Care Fees as a Percentage of Initial Wealth

The Conservative Party have announced their manifesto for the 2017 General Election.  Included in this (on page 64-65) is proposed

We will introduce a single capital floor, set at £100,000, more than four times the current means test threshold. This will ensure that, no matter how large the cost of care turns out to be, people will always retain at least £100,000 of their savings and assets, including value in the family home.

A quick calculation on the effective ‘Tax’ (Care Fees as a Percentage of Initial Wealth) shows the following distribution of Tax Rates.  On the x axis is initial wealth (the value of your house plus any savings), and on the y axis is the Tax Rate.  The Conservative Party have since augmented this plan with a proposed cap (consultation to come).

Values used for Care Fees: £20,000, £40,000, £60,000, £80,000; £100,000.  Values used for Initial Wealth: £0, £100,000, …, £1,000,000.  The trend continues downwards after this figure.

As many have pointed out, this affects individuals with initial wealth just over £100,000 proportionately far more than those with higher initial wealth.  More detail on policy options for funding social care can be found in the Dilnot Commission report and a summary of their proposals is shown below:

 

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