The Dilnot Commission report, set up by the Government to recommend a fair and sustainable funding system for adult social care in England, is to be welcomed.
The current system creates great uncertainty and worry about the future because it is confusing, unfair and unsustainable. People can't protect themselves against the risk of very high care costs and so risk losing all their assets, including their house.
Someone who has lifetime care costs of £150,000 could lose up to 90% of their accumulated wealth. Under the proposed system everybody who gets free support from the state now will continue to do so and everybody else would be better off.
Putting a limit on the maximum lifetime costs people may face will allow them to plan ahead for how they wish to meet these costs.
The ‘partnership' model it recommends strikes a fair balance between individual and state and ensures that the highest costs, which frequently occur at the end of life, will not fall on individuals and their families.
This combination of a cap and the higher means-tested threshold would ensure that no-one going into residential care would have to spend more than 30% of their assets on their care costs.
The cost cap should allow the Financial Services Industry to develop affordable products while shielding individuals from potentially financially catastrophic costs.
These are Individuals whose assets lie above the means test and who have the option to seek insurance solutions to source funds to pay for this initial period of care before state funding kick in and their accommodation costs throughout.
Products with a defined limit on claims should be considerably less expensive than previous products. For example with the appropriate tax treatment, enhanced/immediate need annuities could perhaps evolve into disability linked annuities to fund the initial care period, before the full state funding kicks-in.
Deferred annuities are another interesting product avenue that may be worth pursuing.
It is also feasible that Insurers could develop current product offerings like pensions, savings schemes and critical illness covers into care/accommodation top-up funding vehicles alongside Inheritance and estate planning advice, including equity release possibilities.
An achievable timetable has been set which must culminate in a White Paper by next Spring at the latest and I urge all interested parties to engage in the proposed working group to consider how to enable the development of an effective market.
So overall then a window opportunity for Financial services, but plainly also some challenging communication, advice, market segmentation and product structure and margin issues to be resolved before this particular vessel reaches calm waters.
Importantly older individuals should not wait but should seek advice now as to how these changes could impact for better or worse their health and financial outcomes in old age.
Peter Barnett is a policy adviser in the House of Lords an advisory board member of the Society of Later Life Advisers and the chair of the Continuing Care Conference.
Further Information
Among the recommendations in the report, A fairer funding system for adult social care are:
• Should they need care an individuals' lifetime contributions towards their social care costs - which are currently potentially unlimited - should be capped at £35,000. After the cap is reached, individuals would be eligible for full state support.
• The £35k limit of lifetime personal liability is irrespective of where care is received and does not include accommodation costs. People should contribute a national standard amount to cover their general living costs, like food and accommodation, in residential care. This should be set at a maximum of £10k per annum
• The means-tested threshold, above which people are liable for their full care costs, should be increased from £23,250 to £100,000.
• National eligibility criteria and portable assessments with an objective assessment scale whebye everyone above a ‘substantial' care need threshold is supported, should be introduced to ensure greater consistency.
• A new social care statute should place duties on local authorities to provide information, advice and assistance services in their area, and to stimulate and shape the market for services.
• The Government should work in collaboration with the Financial Services Authority and other partners to develop greater support for those seeking information on financial planning for older age.
• In order to support the development of the market, the Government should set up a working group of central government, local government, the financial services industry, the Financial Services Authority and interested third-sector organisations to consider how to enable the development of an effective market and support consumers in making sound choices.
