The Care Act 2014

The Care Act 2014 which received Royal Assent on 14 May 2014 sets out the legal framework for the provision of adult social care in England. In part, it implements changes put forward by the Dilnot Commission.

In broad terms, the Act follows an individual’s ‘journey’ in the care and support system and maps out the process of assessment, charging, establishing entitlement, care planning, and the provision of care and support. This process determines whether individuals need to pay for their own care, and in the future will include the new capped costs payment system (from April 2016, adults up to the age of 25 will have a zero cap for life. Everyone else will have a cap of £72,000).

The rest of the UK?

Social care in Wales, Northern Ireland and Scotland is a devolved matter and therefore in general, Part 1 of the Act, which sets out the legal framework for the provision of adult social care, applies to local authorities in England only.


A two stage process applies.

On 1 April 2015, most of the Act came into force, including the means by which local authorities should carry out assessments and determine eligibility for support.

In April 2016 the remaining parts of the Act will come into effect, including the introduction of the ‘care cap’.

Charging for Residential Accommodation Guide (CRAG)

Existing legislation placed a duty on local authorities to charge for residential accommodation by virtue of Section 22 of the National Assistance Act 1948. Accordingly, anyone with assessed eligible need for residential accommodation required a financial assessment to calculate their contribution towards the cost of care. The mechanism for assessing this was set out in regulations and statutory guidance issued by the Department of Health, namely the CRAG which was used to assess a resident’s capital, income and contribution toward the cost of their accommodation.

CRAG ceased to apply from 1 April 2015

The care and support statutory guidance now applies.

Care and support statutory guidance

Where a person has eligible needs, the local authority has the discretion to choose whether or not to charge under section 14 of the Care Act. If it charges, it must follow the Care and Support (Charging and Assessment of Resources) regulations and have regard to the guidance.

The detail of how to charge differs depending on whether someone is receiving care in a care home, own home, or another setting. Some common elements are however shared.

Regulations determine the maximum amount a local authority can charge a person. Only in care homes, where the financial assessment identifies that a person’s resources exceed the upper capital limit, is a local authority precluded from paying towards the costs of care. The upper capital limit is currently set at £23,250 and the lower capital limit at £14,250. A person with assets above the upper capital limit will be deemed to be able to afford the full cost of their care. Those with capital between the lower and upper capital limit will be required to make a contribution, known as “tariff income”, from their capital. Any capital below the lower capital limit should be disregarded.

Where a local authority has chosen to charge, it must financially assess that person’s income and capital. The treatment of income will vary depending on the type of setting a person is receiving care in. The treatment of capital is broadly the same for all settings.

Treatment of capital

In some circumstances a person may be treated as possessing a capital asset even where they do not actually possess it. This is called notional capital and includes capital the person has deprived themselves of in order to reduce the amount of charge they have to pay for their care.

Certain capital assets must be disregarded. These disregards include the surrender value of any life insurance policy.

The treatment of investment bonds is described in the guidance as “complex.” Accordingly the guidance suggests that a local authority may wish to seek advice from its legal department. The guidance does however state the following:

“Where an investment bond includes one or more element of life insurance policies that contain cashing-in rights by way of options for total or partial surrender, then the value of those rights must be disregarded as a capital asset in the financial assessment.”

Note however that the Department of Health document contains the following question and answer:

Q “Are there any plans to change how single premium investment bonds are treated in the financial assessment for care and support charging?”

A “Single premium investment bonds that contain an element of life insurance are currently disregarded in the financial assessment no matter how small the element of life insurance. Consideration is being given to how these bonds should be treated in future.

Deliberate deprivation of assets

If a local authority decides that this has occurred in order to avoid or reduce a charge for care and support, then it may treat that person as owning the asset for the purposes of the financial assessment and charge accordingly.

The guidance makes it clear that deprivation should not be automatically assumed. There may be valid reasons why someone no longer has an asset and a local authority should ensure it fully explores this first.

Deliberate deprivation occurs where the individual has intentionally deprived or decreased overall assets in order to reduce the amount being charged for care. This therefore requires the individual to have known they needed care and support.

A local authority should consider the following before deciding whether deliberate deprivation has occurred:

a) Whether avoiding the care and support charge was a significant motivation;
b) Timing. At the point the capital was disposed of could the person have a reasonable expectation of the need for care and support?
c) Did the person have a reasonable expectation of needing to contribute to the cost of their eligible care needs?

For example, it would be unreasonable to decide deliberate deprivation if at the time of disposal the individual was fit and healthy and could not have foreseen the need for care and support.

With regard to deprivation itself, it is up to the individual to prove to the local authority that they no longer have the asset otherwise, the local authority will assess as if the asset was still owned. For capital assets, acceptable evidence of disposal would include a trust deed and deed of assignment. The guidance points out that using assets (i.e. cash) to purchase an insurance bond would be a common approach to deprivation.

Capital treated as income

The guidance states that certain capital payments should be treated as income. This includes capital paid by instalment where the focus is on the instalments outstanding at the time the person first becomes liable to pay for their care. An pre-arranged regular withdrawal facility from an insurance bond springs to mind.


The CRAG may have ceased to apply from 1 April 2015 but nevertheless the treatment of insurance bonds and indeed ISAs containing life policies remains a complex area for local authority charging purposes.

Source: Graeme Robb – Prudential