The publication of the Dilnot Report provides a once in a decade opportunity to arrive at a fair care funding system.
The alternative is a monthly income initially higher to contribute towards the £35k cap plus living expenses and then reducing to living expenses.
But this is sounding like a complex IP product...
So, where does the money come from? Working this into pensions would be ideal both at saving and post-retirement phase.
Beyond home ownership, pensions are the only significant savings most people make and benefit from tax advantages.
Next is avoiding mis-selling. In the past one of the main scandals was LTC bonds.
These were single premium policies where the money was invested in equity markets and a regular deduction made to cover the cost of the insurance policy.
When the market crashed not only was the pot reduced but it was further reduced by the insurance premium deductions – some ended up virtually worthless.
Any new insurance solutions need to ring-fence the LTC element of the product.
When will the policies pay out? The simplest solution would be to directly link this to the national assessment decision.
The alternative would be ADLs set by insurers but here we would need to have a uniform system as with CI conditions.
Unsuccessful attempts were made to achieve this in the past.
Finally, the situation for people under pension age will get much more complicated. Up to age 40 the state will pay all care costs (but not living expenses).
Post age 40 there will be a tapered cap rising from £10k to £35k.
This may have implications for existing IP products especially those linked to ADLs.
Not only are they very difficult to claim on but under the new proposals they may have little relevance to income needs at the point of claim.
Richard Walsh is a director and fellow of SAMI Consulting
www.samiconsulting.co.uk
