How to pay for the cost of long-term care as we get older is one of the biggest hot potatoes of our time, and it’s bound to become a more serious problem. At the moment the oldest of the baby-boomer generation are around 72, but long-term care is primarily an issue for those in their 80s and beyond – so demand will rise in the coming decades as that population bulge moves into and through their 70s.
Theresa May’s poorly thought-out social care proposals and subsequent U-turn on them proved a political disaster for the Conservatives in the recent election, and there is real concern among the experts that social care will simply be sidelined by the new government as a result. That would be a much bigger disaster, not least for the older people who make up the mainstay of the Tory vote.
So what needs to happen now? First, there’s a huge piece of work to be done, in order to work out what the deal should be between state support and personal contributions to long-term care. It needs to be long-term, looking ahead for the next 30 or 50 years; it needs to be sustainable and simple; and crucially it needs to be taken out of the political arena, so that people can plan for their contribution – whatever form it takes – with confidence that the system won’t be tampered with by future short-termist governments. Some kind of cross-party commission is an obvious starting point.
That piece of work will throw out a whole clutch of further difficult questions, topped by the big issue of what actually counts as social care and where, or indeed if, a line should be drawn between it and broader healthcare provided by the NHS. As former pensions minister Ros Altmann puts it: ‘[As things stand] a 90-year-old millionaire with cancer could have all their care paid for by taxpayers, but if they get dementia they must pay for themselves,’ down to the last £23,500 of savings or assets. Michael Johnson, research fellow at the Centre for Policy Studies, believes there should be no differentiation between the two camps. ‘Either you need assistance or you don’t,’ he maintains.
And then, of course, there is the question of how state support will be paid for – through extra national insurance contributions, perhaps.
Other key questions will revolve around whether individual contributions should take the form of a protected ‘floor’, as is the case at the moment and as the Tory manifesto proposed with its £100,000 floor; or a lifetime limit on the amount people have to pay, as the Dilnot Report of 2011 recommended with its £72,000 cap; or indeed some other deal. For instance, Steven Cameron of insurer Aegon suggests it would be fairer to put a limit on the amount of time care is paid for by individuals – say three years – rather than on the amount they pay.
Once a sustainable scheme has been hatched for the state’s role, people need to be encouraged to start building social care provision into their retirement planning. Experts are already coming up with ideas about how this might be done.
Cameron is among those who see it as an integral part of ‘saving for retirement’, so that some part of people’s pensions is ringfenced to cover care costs if needed, perhaps with the carrot of withdrawals for that purpose being made tax-free. Johnson, meanwhile, offers radical proposals for a single all-encompassing Lifetime Isa that would cover all our savings requirements, including social care.
Our pensions columnist Steve Webb, in contrast, believes this is an area that should be insured against, on the same principle as people buy home insurance – sharing the risk on the basis that the unfortunate few whose homes do burn down are covered.
‘I’ve always thought this was more of an “insurance” issue than a “savings” issue,’ he says. ‘There’s no way we could – or should – save enough to cover our potential care costs. But we might be able to pool that risk with others through a mix of social insurance (the Dilnot cap, for example) and private insurance.’
That insurance in turn might take various forms. It might be a single premium insurance policy that you set up out of your pension when you start to draw it, or it could be an additional element of a life insurance policy, or the lump sum or regular premium might be charged against the value of your house.
The trouble is that until there is a plan with clear parameters, so that people know what they will get from the state, it’s very hard for the private sector to design products to complement it. So let’s get a cross-party working party of clever, well-informed lateral thinkers to come up with a truly sustainable plan.
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