As of 2017 the state will pay the cost of any care above that £75,000, however this does not include food and accommodation costs.
While costs vary hugely it is estimated that half of all those turning 65 in future will have to pay up to £20,000 towards their basic nursing care such as help to getting dressed and washed, while for one in 10 the figure will be above £100,000.
Nigel Waterson, chairman of the Equity Release Council, said: “Today’s announcement is excellent news as at long last it provides people with concrete guidelines they can use to plan for care costs and the reassurance that they will not necessarily have to spend all their savings on this expense.
“But the question still remains – how will they find these potentially very large sums?”
Waterson said the average over-55 owns a home worth £208,686 therefore equity release would allow them to meet these costs and still leave an inheritance without having to sell the family home.
He added: “This move by the government will also spark innovation as providers, such as our members, now have a framework in which to develop robust products which meet this growing consumer need.”