25 February 2013

Long Term Care - The Proposals

The Government's aim with the recent proposal has been (it says) to bring greater peace of mind to people in capping the cost of long term care. The proposal is that an individual's costs will be "capped" at £75,000 from 2017.

In addition, the current means-tested level of assets at £23,250 (above which you pay for yourself) is proposed to increase to £123,000. However, between that amount and the lower limit of £17,500 the local authority will use someone's income level to increase their notional capital - potentially putting it over the limit and outside of local authority funding.

A further "however" is that the cap only covers "personal social care" and doesn't cover living expenses, or any other expenses above what the local authority would normally pay. In other words it's not much of a cap at all. So things are still not at all clear.

It's a costly area, whether individuals pay or the Government pays. And the current proposal to provide part of the funding will come by continuing the freeze on the Inheritance Tax threshold at £325,000 for another three years beyond the current freeze which ends in 2015.

All in all there is a long way to go before there is clarity, and even further before there is fairness. For individuals the best approach, as ever, is to plan ahead with professional advice.

4 February 2013

Rich or Poor? - here's how you choose

To me, being rich or poor is not about the level of assets you own or the income you receive. Instead it's about your ability to make choices.
Let me explain that at two levels:
1. The biggest financial planning tip which I can give to anyone is to plan ahead. And that basically means saving - whether into a pension, via stock market investments, or simply a deposit account. And yes, that means making a choice to have less now in order that you can have more later in life.
Sadly, it's not unusual for me to come across people with very good incomes who have always spent the whole lot each month and have no savings (and may even have big debts). Basically they have stolen their own future. Their choices are limited; they are poor (and it's not unusual to see such people at the local foodbank which I volunteer at).
Choosing to save now means you have more choice later. You may not feel "rich" when you retire but you will certainly feel "poor" if you only have the State Pension. So do yourself a favour! (... and your children, grandchildren, employees, ... who can all be helped in the right direction).
2. But the principle also applies to life as a whole. If you perceive that you are unable to make choices, then you will feel poor. Here's the crunch - sometimes it's not the level of assets which needs to change but the perception.
If your perception is that you need a 5 week world cruise as a holiday every year, then you will feel poor if you are unable to have it. On the other hand if you can choose between two favourite local campsites then you will feel rich.
As well as people with assets who are poor, I have also met plenty of people without much who are rich. It's your choice.

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