Pay when you die: Pensioners told loans to cover care will stop them having to sell homes

Relatively low interest rates are likely, with the "loans" covering the fees recouped when the home is eventually sold or when the person dies

Action to stop thousands of pensioners being forced to sell their homes to pay their long-term care bills will be announced by the Government today.

In a long-awaited White Paper, ministers will pledge their support in principle for a cap on the amount people would pay for care during their lifetime. But they will disappoint campaign groups for the elderly by delaying a decision on when this might take effect and how the state would fund it.

A £35,000 lifetime limit was recommended by a government-ordered inquiry chaired by the economist Andrew Dilnot a year ago. Old people would take out insurance to cover payments up to this ceiling, with the state then picking up the bills.

But George Osborne, the Chancellor, has refused to sanction the £1.7bn a year cost, which was predicted to rise to £3.5bn over time, and decisions have been put off until a government-wide spending review due next year. This means social care reform is unlikely to happen before the 2015 election. When action is taken, the cap could be raised to as much as £75,000 to keep down the cost to taxpayers.

Andrew Lansley, the Health Secretary, will announce today that many of the 40,000 old people who have to sell their homes each year will be offered a form of loan through their local authority from April 2015.At present, for the first 12-week period when someone enters residential care, housing wealth is excluded from the means test under which people do not get state help if they have £23,000 of assets. But organising a sale during this period is often difficult and stressful – especially if the person's partner still lives in the home.

The "universal deferred payments" would allow people to delay selling their property for much longer than 12 weeks. Ministers say central government will work out the details with councils and ensure they have enough money to provide a nationwide scheme. Relatively low interest rates are likely, with the "loans" covering the fees recouped when the home is eventually sold or when the person dies. Mr Lansley said the plan will give people greater flexibility. "The last thing people want to think is having to immediately sell their home to pay for residential care," he said.

The Health Secretary will also announce an extra £300m to be transferred from the NHS to social care between 2013-15 to ensure more elderly and disabled people can remain in their own homes through greater integration of health, housing and care services. However, all-party talks on a broader, long-term solution appear to have broken down for the second time in two years.

Liz Kendall, Labour's spokeswoman on care, told Fabian Review: "We're very concerned that the Treasury doesn't support Dilnot. It's a massive mistake. Health and social care will be the primary pressure on public finances, and without reform funding will be unsustainable….We want it done in this parliament. We'd like to see agreement before the spending review."

Mike Farrar, chief executive of the NHS Confederation, said: "We can no longer afford the political debates and academic discussions about social care funding. This is a real issue that is having a detrimental impact on people's lives, now, today."

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