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News & views

Nine per cent on your savings: you heard it here first

[4 Sept 2013] Martin Cutts reports on the astonishing interest rate that the Government assumes old people can get on their savings

As everyone knows, the previous Government kicked into the pampas grass the question of how to help old people faced with crippling residential care-home costs – staying in a moderately decent care home can easily cost £650 a week or £33,800 a year. The coalition has scarcely done any better, planning only to bring in some footling changes after 2016 that will do little to remedy the worst problem, which is, put simply, as follows.

If you have heeded successive governments and been thrifty, putting aside a little money to buy a house or build a savings pot of, say £75,000, you will be screwed for every last penny of your care-home fees down to the savings threshold of (currently) £23,250. And while you are being so screwed, you will have the pleasure of knowing that someone in the next room to yours will be getting everything free – paid for by the State – because they ignored the advice to work hard and save, and instead blew all their money on drink, gambling, prostitutes and luxury holidays.

In fact, the Government makes sure it bleeds you dry by inventing a ridiculous interest rate and assuming you are earning it. It tots up the value of your little savings pot – your unsold home, say, at £100,000 – and assumes that you make nearly 9% interest on it every year while you’re in care. This astonishing rate – which is about SIX TIMES what anyone can actually get on their savings at present – is thus assumed to bring in £9,000 a year, which puts you way over the limit for receiving pension credit towards your fees. Only when you’ve been pauperized – all your savings going towards your care-home fees until they’ve dwindled to £23,250 – will you get any help at all.

So that’s how it works: the Government assumes you earn 9% on your savings, when you’re lucky if you can get 1.5%. [cont]

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