Jeremy HuntThe coalition is to announce that elderly care bills are to be capped by the state in a £1 billion move expected to be funded by dragging more people into inheritance tax.

To the disappointment of many campaigners, the cap will be set at £75,000 - more than double the £35,000 recommended by the independent Dilnot Commission.

Penions Tools & Tips

Retirement Tips & Tools


But thousands more people will be hit with inheritance tax bills because of a three-year extension of the freeze in the £325,000 threshold - £650,000 for couples - at which it kicks in at 40%.

Alongside the cap, Health Secretary Jeremy Hunt is to announce a large rise in the assets threshold beneath which people receive means-tested support meeting care bills. Currently £23,250, that is set to rise to £123,000.

Mr Hunt said: "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.

"And what we are trying to do is to be one of the first countries in the world which creates a system where people don't have to sell their own house."

Speaking on BBC1's Andrew Marr Show yesterday, he said the current situation was a "scandal" in which 30,000 to 40,000 people a year have to sell their houses to pay for their care costs. Mr Hunt said it would be a "fully funded solution" and one that would pave the way for insurers to provide a system of cover for elderly care.

"Finances are very, very much constrained at the moment and the fact that we are finding what might be as much as £1 billion a year to do this, shows that we want to help those hard-working people who have saved all their life and suddenly quite randomly find that their house is at risk," he said.

National Pensioners Convention general secretary Dot Gibson said: "The social care system needs urgent and radical reform, but these proposals simply tinker at the edges... Setting a lifetime cap on care costs of £75,000 will help just 10% of those needing care, whilst the majority will be left to struggle on with a third-rate service."

Shadow care and older people's minister Liz Kendall said a "bigger and bolder response" was needed. She said: "This would be a small step forward for some people who need residential care in five or more years time but it won't be fair for people with modest homes." The Association of British Insurers (ABI) said the reforms were a potential "step forward".