UK social care costs vs Irish "Fair Deal"

BrianD3

I was watching sky news regarding social care reform in the UK. While there will undoubtedly be complaints, there is at least what looks like a long term funding plan with attention paid to the relationship between health care and social care.

One aspect that stood out for me was the lifetime cap on payments for anyone needing residential care - 86000 GBP. Compare that to Ireland where someone with assets who needs nursing home care for a few years could pay several hundred thousand. Many nursing homes are 100k or more per year and under the so called Fair Deal, you pay 7.5% of your asset value and 80% of your income towards care costs per year. If someone had decent savings and pension and owned a house in Dublin they could well end up paying 100k per year.

Although the 7.5% contribution from a person's PPR ends after 3 years' care, this has knock on effects with people not selling their vacant homes as if they do, the 3 year cap doesn't apply to the proceeds of the sale. There are also various other cute tricks used (understandably) by people to minimise what they will pay under the Fair Deal. The system seems designed to discourage saving, encourage early disposal of assets (potentially resulting in family rows and less independence for the disponer) and encourage the hiding of assets, cash under the mattress etc.

Nermal

The three-year cap on the PPR is just one of many distortions in our tax code that shelters property over other assets.

Is it any wonder housing is overpriced, when it's pretty much the best way to protect your wealth?

Anyway, as you say: both systems punish saving. Care should be funded by general taxation.

KaneToad

The Fair Deal also 'protects' the family farm from being 'lost'.

I find this a bit of a distortion too. Why shouldn't it be used to fund the cost of care?

Podge_irl

https://www.boards.ie/discussion/comment/117861990#Comment_117861990

With an aging population and increasing cost of care and diminishing wealth of the working population, funding it purely out of general taxation seems grossly unfair.

cruizer101

If anything it could encourage older people to upsize rather than downsize.

Say they have house worth 600k and another worth 400k they rent out. As the second isn't ppr the state could end up taking a huge chunk of it, whereas if they bought a house worth 1M state can only take a limited amount of it.

I doubt there are many thinking of upgrading with that logic but it definitely doesn't encourage downsizing.

Nermal

https://www.boards.ie/discussion/comment/117862020#Comment_117862020

More unfair than penalising those who bothered to save for retirement?

Means-testing is a mistake, everywhere and always. It perverts incentives and serves only to generate work for civil servants.

Podge_irl

https://www.boards.ie/discussion/comment/117862189#Comment_117862189

Yes, massively.

Anyway, no one is being penalised for saving for retirement. That's like claiming you're being penalised for earning more.

cruizer101

I wouldn't say they are the same.

If you earn more you pay more tax yes but you still have a net benefit.

If 2 people on same income, one saves more for retirement, they will end up paying more under fair deal scheme because they were prudent with no benefit.

Podge_irl

Fair, but then short of kicking people out of care homes when they run out of cash you will have an equivalent financial disparity somewhere. And ultimately it is societally more fair to penalize the person with millions of pounds of assets then the one earning 20K with zero wealth.

plodder

https://www.boards.ie/discussion/comment/117862030#Comment_117862030

Exactly, it's a separate issue to the funding problem. It is a distortion that runs counter to the current drive to make more efficient use of our housing stock.

It's a surprise though to see the difference with the UK. That must put a significant burden on the tax payer to fund the difference over there.

banie01

My primary issue with the UK's proposed means of funding social care is the sheer regressive nature of it.

The proposed tax change impacts income far more for a low and middle income earner than it does high earners.

It also is completely ignores unearned income. There is an increase in Dividend tax, but, this does nothing to address rental incomes.

It also leaves those with assets of under 100k grossly exposed to dilution whereas those with more than £100k are exposed to a maximum charge of £89k. Those with low assets or property worth are being thrown on the pile IMO.

This was an opportunity for the UK to reintroduce a far more progressive means of funding. Taxing wealth, unearned income and closing loopholes in corporate and personal tax to ensure that a far fairer and effective tax raise is effected.

This isn't just a shout to "tax the rich", I'd rather liken it to tax in a progressive and fair manner, don't punish the working/middle class whilst protecting the sacred cows of generational wealth, property and unearned income.

BrianD3

Was reading up more on the UK reform, it isn't clear to me if the thresholds include the value of the person's PPR and any rental properties. "Assets" and "financial assets" are both used in the below quote on sky news website..

"The reforms will see a threshold of £100,000 on the amount of assets a person has before they have to fully fund their own care. Currently, the threshold is £23,250.

From October 2023, anybody with financial assets lower than £20,000 will not have to pay anything for their care from their assets - but may have to contribute towards costs from their income.

The amount anyone with assets between £20,000 and £100,000 will pay will be means-tested so the fewer financial assets someone has the less they will pay for their care.

The amount anyone has to spend on care will be capped at £86,000 over their lifetime - including younger people receiving care"

Nermal

https://www.boards.ie/discussion/comment/117862305#Comment_117862305

So fund it through a combination of income and wealth taxes.

Some of us will die suddenly of a heart attack. Some of us will linger on with dementia for a decade or two. Our system of taxation and how we pay for social care should make both outcomes equivalent in cost to us, otherwise we're faced with perverse incentives.

Annasopra

https://www.boards.ie/discussion/comment/117862020#Comment_117862020

It doesnt seem grossly unfair to me if the taxpayers ending up getting the benefit of it.

Podge_irl

"Taxpayers" aren't getting the benefit of it. People with wealthy parents are getting the benefit of it.