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Warning over care scheme interest
Elderly people using a new Government scheme to avoid having to sell their home to pay for the cost of care could be charged thousands of pounds more than they expected in interest, Labour has warned.
New legislation will require councils to offer loans to help cover care home fees, which will be paid back by selling the home after the recipient's death.
It has been revealed that interest charged on the loans will not be included in the Government's £72,000 cap on care costs, meaning that the debt will get bigger the longer an elderly person stays in residential care - and will continue piling up until their home is sold after their death.
Labour calculated that a typical pensioner spending two-and-a-half years in care will clock up extra costs of £3,500 in interest, which their family will have to pay back from the proceeds from the eventual sale of their property. More than one in eight care home residents stay for five years or more, which could cost upwards of £13,800 in interest alone.
Figures obtained by Labour under freedom of information laws suggest that 95% of councils already provide deferred payment loans without charging interest while the pensioner is still alive. Under the Care Bill, currently going through Parliament, councils will be required to offer the loans and will be able to charge interest at a nationally set rate, expected to be around 4%.
Labour spokeswoman for care and older people Liz Kendall said: " These hidden interest charges will come as a huge shock to elderly people and their families. Ministers have repeatedly claimed care costs will be capped at £72,000 but the truth is different - elderly people will have to pay far more.
"These new interest charges won't be included in the so-called cap on care costs, and will continue to clock up if people can't sell the family home once a loved-one has died.
"Elderly people deserve to be told the truth about how much they will really have to pay under the Government's social care plans. David Cameron must now come clean, so families can properly plan for the future."
The Department of Health said it did not recognise Labour's 95% figure for councils already providing loans. An inquiry into the cost of care led by Sir Andrew Dilnot found in 2011 that deferred payments were not widely used. This was in part due to the fact that councils were not allowed to charge interest, and so could only run schemes at a loss.
Across the country, only 7% of those funding their own residential care take out deferred payment loans and only 10% of those do so for three years or more, said the Department.
"The independent Dilnot Commission recommended that councils should charge interest on deferred payments and that is exactly what we're proposing," said a DoH spokesman. "These are not hidden charges - they have been part of an open consultation with the public.
"We do not want people to have to sell their homes to pay for care, as is often the case in the current system, but we need to make sure this scheme is sustainable in the long term. We are very clear that local authorities will not profit from any interest and can only charge to cover their costs."