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ASK OUR ADVISERS - Why is tariff income so high?

Tariff income is the amount a person is required to contribute towards their care costs when they are supported by their local authority and they have savings between the lower support threshold of £14,250 and the upper support threshold of £23,250.


The amount payable is £1 per week for every £250 of savings so with capital of £23,250, tariff income is calculated at £36 per week.


In our view, the way in which tariff income is calculated has always been extremely harsh.


The requirement to make a contribution of £36 per week, because of assessable savings of £9,000 assumes an interest rate of 20.8%.


Clearly this is way above the rate of interest paid by banks, which is typically less than 1% and so tariff income will result in savings being eroded.


Under the new care cap proposals this assumed interest rate is maintained AND applied to the higher threshold of £100,000.