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Public urged to buy insurance to pay for £75,000 care bills


Millions of working Britons will need to take out insurance to pay for their care in old age in addition to saving for a pension, under government plans.

Jeremy Hunt, the Health Secretary, will tomorrow announce a £75,000 cap on the amount pensioners have to contribute towards their care, while significantly increasing the value of assets people are allowed to have before they lose state help towards their bills. The moves are designed to prevent people from being forced to sell their home or handing over all their savings to pay for their care.

The £1bn shake-up, which is due to come into effect in 2017, will partly be paid for by the contentious step of freezing inheritance tax for the next three years – a proposal that will trigger anger on the Tory right.

But Mr Hunt said yesterday: "The point of what we are doing is to protect people's inheritance. The worst thing that can happen is at the most vulnerable moment in your life you lose the thing you worked hard for, that you saved for, your own house."

He told BBC1's Andrew Marr Show that by establishing the £75,000 limit it enabled insurance companies to design products – alongside pensions – that will meet the costs of any care below that level. Mr Hunt said: "We need to change the culture in our country so that, just as people make provision for their pensions in their 20s, their 30s, they understand they need to make provision for when they're retired. So we also need to be a country where people prepare for their social care."

The plans – to be unveiled by Mr Hunt in a Commons statement – follow years of agonising by all parties over how to meet the spiralling cost of caring for a rapidly ageing population.

The Government appointed the economist Andrew Dilnot to draw up plans to reform the social care system. He recommended setting a cap of £35,000. This was rejected by the Treasury as too expensive and after months of wrangling ministers have decided to set a limit of £75,000.

Nick Clegg, the Deputy Prime Minister, who said reforming the funding of care was a priority for the Coalition in the second half of its term in office, said yesterday that under the plans no one would have to sell the family home in old age "because they developed the wrong kind of illness".

Mr Hunt said the Coalition's commitment to the issue was demonstrated by its decision to allocate £1bn a year to social care reform at a time when budgets were being squeezed. But he risks a political backlash by raising some of the cost by extending the current freeze on inheritance tax for another three years.

Anybody bequeathing more than £325,000, or £650,000 for couples, has to pay 40 per cent tax on anything over those levels, which have not been raised since April 2009 despite inflation. The move will affect some 5,000 wills a year and could leave some families £95,000 worse off than if the tax had been raised in line with inflation.