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Category — Paying for Care

Help people use pensions and savings to fund social care

8 February 2017

  • Care crisis is worse than pensions crisis – but pensions and savings could help fund social care
  • Many baby boomers have pensions and ISAs but no incentive to retain money for care
  • Chancellor’s Budget could consider tax-free pension withdrawals and IHT-free ISAs for care savings
  • Such incentives would let people know they need to prepare for care costs  
  • Have to get real about the scale of care challenge – need combination of public funding, national insurance, private savings and integration with healthcare

The UK crisis in social care is potentially far worse than the pensions crisis:  Both issues are a function of our aging population, which is a good news story.  But, because successive Governments have failed to properly prepare, it is turning into a disaster.

No money aside to cover the inevitable costs of aging:  There is no money at Government level – it’s all left to cash-strapped councils who cannot cope.  There is no money at private level either, because most people have not seriously considered this issue, wrongly assuming the NHS will look after them or their loved ones.  This is short-sighted policymaking at its worst.

Advanced old age usually entails extra spending: With increasing numbers of much older people in this country, it is inevitable that more money will be needed to look after them in later life.  This should be no surprise.  An aging population is bound to need money for this but so far all the Government incentives and preparation for later life income have revolved around pensions, with nothing to pay for care.

Current cohort of older people is small, but will rise sharply in coming years:  The fact that the social care system is so poorly understood and that there are no incentives to help people plan for such costs just in case it is needed, has led to a complete lack of preparedness.  The cohort of older people needing care now is actually relatively small, but in 20 years or so the huge demographic bulge of baby boomers will increasingly need looking after as they reach their 80s.

Pensions could be adapted to help fund care:  However, pension income is not designed to cover the extra costs of care.  Nevertheless, pensions could be adapted to provide some help, as could other savings products, with a little extra incentive from the Treasury.   There is an opportunity to encourage baby boomers to set money aside in advance, in case they need care.

Millions of older people do have pensions and savings but they may spend them soon:  Of course, the majority of older people are not hugely wealthy but millions do have savings and pensions built up over the years.  The pensions crisis for future retirees is being addressed, belatedly, with a reformed state pension and auto-enrolment.  But for today’s sixty-somethings there is much more to be done.  With the new flexible pensions landscape, there is an opportunity to encourage them to keep some capital sums for later life, rather than planning to spend them straight away – and indeed for those who have ISAs, it is important to encourage them to consider keeping some of those funds unspent as a ‘Care Fund’ in case they need it.

New incentives in the Budget urgently needed to help fund care:  But an important part of the mix should be new incentives to encourage people to use their pensions and savings for care.  Here are some suggestions for the Chancellor.

Allow people to take money out of their pension funds tax-free if they use it for care:  Doing this would give people a further incentive not to spend all their pension fund too soon.  If they have money in their pension, but don’t think about using it for care, then by the time they need care the money may all be gone.  Signalling the importance of not exhausting pension funds too quickly would give an additional behavioural incentive for people to leave money aside in their tax-free pension wrapper as a potential ‘care fund’.  If they don’t actually need it, then the fund passes to their loved ones tax free, so it could form a care fund for a partner too.  Care costs are much higher for women than for men, because they live longer.  With a traditional pension, widows do not receive a capital sum to help them fund care and, under the old pension rules, once their husband had bought an annuity (the vast majority of which were single life) the pension died when they did.  Even if they had a joint life annuity, the widow only inherited a part of the income and no capital sum.  With the new freedoms, if the husband keeps money in his pension fund and does not spend it all on care for himself, the money will be available to his widow for her care if needed.

Relax the regulatory attitudes to transferring money out of Defined Benefit pensions: The current regulatory attitude strongly discourages transferring money out of Defined Benefit final salary-type pensions into a Defined Contribution (DC) arrangement.  This should be relaxed.  With the new freedoms for DC pensions, there could be many people who would benefit from such transfers.  Giving up a relatively small, guaranteed pension income might be the optimal decision for a family, particularly if they have other pension income and this is just one smaller deferred pension that will not make a dramatic difference to their lifestyle.  As an example, a £50 a week final salary-type pension could be worth around £100,000 as a transfer value.  If a husband and wife were to take a transfer of this size into a Defined Contribution pension, they may not miss the £50 a week, but they could hugely benefit from the £100,000 fund in coming years to help pay for care.  Transferring small deferred pensions can both help pre-fund care costs -and the surviving partner can inherit that sum in full, rather than just receiving a fraction of their deceased partner’s pension if it were still in the DB scheme.

Introduce special ISA rules for Care ISA funds – free of Inheritance tax:  Many older people already have ISA savings, but they do not think of retaining that money until much later life, as a potential ‘care fund’ to help them pay for care.  Some will spend the money on holidays, new cars, house refurbishment or for other needs but if there was a clear reason not to spend it, then there could be more money set aside for care within families.  Earmarking some of their ISAs for care, in a newly-created ‘Care ISA’ environment, could benefit many people in years to come.  The Chancellor could consider allowing people to transfer some of their existing ISAs into a ‘Care ISA’, or could allow an additional ISA allowance for care.  Indeed, the money currently spent on the Lifetime ISA as a 25% bonus would be much better spent on incentivising saving for later life care.

There is no one silver bullet that will solve the care crisis: A crisis is already upon us and there is no one magic solution.  However, a range of measures, when added together, can at least make a start in preparing the nation for care.  Savings incentives need to be part of the mix.  In addition, broader reforms could include a national insurance system to improve publicly available funding.  Better integration of health care and social care is also urgently needed, so that older people’s needs are specifically addressed in the most cost-effective way, instead of being artificially separated between wholly inadequate council funding and hugely expensive NHS care.  This could include keeping small local hospitals open as ‘convalescent homes’ where older people can be safely discharged and encouraging GPs to ‘prescribe’ preventive measures such as homecare, handrails, telehealth or personal alarms.  Funding for meals-on-wheels could be restored and better information and advice for families whose loved ones need looking after could alleviate some of the pressures too.

Government must get real about the scale of the challenge:  I urge the Government to act swiftly on this issue.  The system is already in crisis and is much more difficult to solve than the pensions crisis.  With pensions, ultimately, the Government has decided to make people wait longer and to pay them less.  Such options are not realistic for care.  Once people need care, you cannot make them wait longer without causing harm.  And we are already forcing people to accept less care, which is part of the crisis.  Now is the time for action, no more waiting and hoping.  One mark of a decent society is how it treats its older, vulnerable people.  We must not fail our aging population.

February 8, 2017   2 Comments

Is Government going to introduce saving incentives for social care?

14 December 2016

Jeremy Hunt is right we need for private savings to help fund care crisis

  • There’s no one solution but private savings must be part of the mix
  • Care costs much higher for older women than older men
  • Government can introduce tax incentives to help families save for care costs
  • Care ISAs, Workplace Saving Plans, Eldercare vouchers, Family Care Saving Plans free of Inheritance Tax
  • Consider using auto-enrolment and free Guidance to kick-start care savings as part of 2017 auto-enrolment review

Jeremy Hunt is right – people will need private savings to help fund later life care: Politicians have talked about social care for years, but have ducked the difficult decisions required to address this time and again.  Despite knowing that numbers needing care will rise inexorably, policymakers have not set aside public money, or encouraged private provision to pay for care.  The quality of care has suffered, many companies cannot afford to deliver decent care within the council budgets, and the screaming headlines from recent days continue to highlight that this crisis is just getting worse.

There is no money set aside for care:  There is almost no money earmarked to pay for the care people will require – not at public or private level.  Estimates suggest that around half the population over age 65 will need to spend at least £20,000 on later life care, and one in ten will spend over £100,000.

Problem is worse for older women than for men:  The CII Report released yesterday on Risks in women’s lives found that this is a much worse problem for women.  The median man over age 65 will need to spend around £37,000 on later life care, but the median woman will need around £70,000.  Where will this money come from?  It either has to come from councils on a draconian means-tested basis, or the NHS (when early intervention or prevention is not funded), or individuals and their families who suddenly find themselves faced with huge spending they had not prepared for.  And of course older women are less able to save for their future needs because they are more likely to have to cut down or stop working to provide care for loved ones – society takes this free female caring for granted.

Families will need to prepare for some costs, but they need help.  Local authority care funding is subject to one of the strictest means-tests.  Most people will receive no help from the state until they have used up the bulk of their assets (down to £23,250) and until their needs are considered ‘substantial’, causing significant distress to many families and leaving the majority of families without the care their loved ones or they need.  Many suddenly have to find significant sums at short notice.  Ideally, money is needed for prevention and early intervention, so that people can have a little help or pay for measures that will ensure they are safer and less likely to fall.  But they need to know what to do.

Products for care funding are inadequate.  There are some products already on the market to help people pay for care but they are expensive and will not help with prevention.  These include Immediate Needs Annuities, Equity Release and local authority deferred payment plans, but each has advantages and disadvantages and they only help at the point of need, rather than allowing people to make plans in advance.

Encouraging saving for care could help.  It seems that Jeremy Hunt may be signalling that at last the Government recognises the importance of helping families prepare for social care costs in advance.  People don’t know they will need such sums, but if they spend all their pensions or ISAs before they reach their 70s and 80s, they may really regret not being able to pay for the help they need.  I believe Jeremy Hunt is correct, some private savings will have to be part of the mix.  21st Century retirement income is about more than just pensions.

Extra tax breaks to encourage long-term care saving.  We spend around £40billion on incentives for pension saving and not a penny on incentives for social care saving.  21st Century retirement needs more than a conventional pension to help fund later life.  Providing taxpayer incentives and employer incentives is important because the cost to society of failing to ensure money is set aside for future social care needs will put intolerable burdens on the NHS and on younger generations as well as on older people.  Urgent action is needed to head off a disaster that is clearly on the horizon.

Care ISAs – IHT free: The Government could introduce a separate annual allowance for ISAs that are specifically earmarked to pay for care or allow people to transfer existing ISAs.  Launching such ‘Care ISAs’ would itself help people realise the need to save for care.  It could allow up to, say, £50,000 or £100,000 per person to be earmarked for care spending and such Care ISAs could be passed on free of inheritance tax to fund Care Savings for the next generation too.

2017 review of Auto-enrolment could consider encouraging workplace care saving plans:  Alongside auto-enrolment, it might also be helpful to ensure that employers are encouraged to offer the option for people to save in a workplace savings plan that is set aside specifically for care.

Workplace Saving Plans and flexible benefits packages to include eldercare:  The Government needs to incentivise employers to help staff prepare for care costs.  This can include savings plans to build up a fund to cover care costs, and also such ideas as eldercare vouchers, along similar principles to childcare vouchers.  Employers can help their staff pay for someone to look after elderly loved ones, rather than having to leave work or suffer stress when such help is not available.  This could be part of a flexible benefits package, which receive an employer contribution.

Family Care Savings Plans – IHT free:  Another possibility is for families to save collectively for the care needs of their loved ones.  For example, parents, siblings or children might join together to build up a fund in case one of them needs care.  The probability is that one in four people will need care, but nobody knows in advance which one.  Tax breaks to incentivise this kind of saving, perhaps allowing them to be passed on free of inheritance tax, would help.  There is a role for insurance with such savings plans – which might also include some ‘catastrophe insurance’ to pay out if more than the expected number in any family or group actually need care.

Tax free pension withdrawal if used for care:  The new pension freedoms could encourage people to set aside money for later life care.  Now that the annuity requirement has been removed, and there is no 55% death tax, pension funds could help cover care costs.  Many people reaching retirement have tens of thousands of pounds in their pension funds but if they use this to buy an annuity, they will have no money to pay for care.  Allowing people to withdraw money from their pension fund without paying income tax, if it is to pay for care, would encourage them to retain some funds in the tax free pension wrapper for longer, just in case it is needed.

Demographics show numbers needing care set to soar:  The cohort needing care at the moment is a relatively small proportion of the population, but millions of baby boomers are currently reaching their 60s and will need care in the coming twenty years or so. The numbers needing care are, therefore, set to soar.

Long-term care funding is one of the least understood parts of the health and care system.  Unfortunately, many people mistakenly believe the Government will pay their care costs.  But social care is the responsibility of local authorities, not the free NHS.  This system dates back to the Poor Laws of the 1800s and was completely omitted when Beveridge developed our National Insurance system and welfare state.  The difference between social care and healthcare is not easy to define, but as an example, someone with cancer is likely to qualify for healthcare funding with care provided at taxpayers’ expense, while someone with dementia may not be considered to have a ‘health’ need and gets no public money at all.

Public need to be informed about preparing for care:  We could extend the PensionWise Guidance service to provide information and education for people about preparing for care needs.  This could come from their pension savings or additional savings but because people don’t understand the system, they will definitely need help in planning for care.

The time to address this crisis is now:  It cannot wait longer without causing more misery.  Social care in this country is failing and radical action is long overdue.  This is not just about elderly people, it’s about families and loved ones who are being denied a decent standard of living in modern-day Britain.  Introducing incentives to help people save for later life care, as well as earmarking more funds from council and healthcare budgets, in an integrated fashion, will be vital parts of any solution.

December 14, 2016   1 Comment

Care ISAs and incentives for care saving

2 February 2015

  • Government considering savings incentives for social care
  • Possible ways to incentivise care saving schemes:  1. Care ISA   2. Tax free pension withdrawal   3. Care saving in auto-enrolment
  • Could help millions of middle income families not just the well-off

Government must tackle lack of care funding: Are Ministers finally waking up to the need to help people save to pay for social care? I do hope so. It seems they may be considering savings incentives, to help people prepare for potential care bills for themselves or their loved ones. Estimates suggest that around half the population over age 65 will need to spend at least £20,000 on later life care, and one in ten will spend over £100,000.

Insurance unlikely, need to encourage savings: Insurance companies cannot offer an insurance solution to cover care costs, so private savings must form part of the solution. With an aging population and rising longevity, it has long been clear that increasing numbers of older people will need care. Yet there is no money set aside by the state or in private savings to cover care costs. Obviously, using a family home is a possibility, but many would prefer other means.

Care ISAs and tax free pension withdrawal could help kick-start care savings culture: How can we help families start to plan care savings? Tax-free ISAs are a simple and popular form, but most people do not have specific spending plans for their ISAs. A ‘CareISA’ in the Chancellor’s final Budget would not involve upfront tax relief as with pensions. Launching a CareISA specifically earmarked to pay for care would itself help people realise the need to save for care and help kick-start a care saving culture that currently does not exist. In addition, allowing people to spend their pension money on care without paying tax first would also encourage more to keep money for later life as well as signalling the need for care saving plans.

Making a CareISA work – IHT free? A separate annual allowance for a ‘Care ISA’ of perhaps £10,000 a year, maybe with a lifetime maximum of £100,000 contributions would be an excellent measure for the Chancellor’s Budget. Transferring money from other ISAs into a CareISA could also be allowed. The money could only be spent on approved care provision (but it could cover care for a loved one as well as paying for moderate or preventive needs because such early intervention might help save money for the NHS). To increase the attraction of CareISAs they could be exempt from inheritance tax. Just as with pensions, they could then be passed on to future generations as a Care Savings plan. This could finally begin the process of planning in advance for care funding. Within any one couple, there is a 50/50 chance that one will need care, in a family of four, one is likely to need care but no money is set aside. Saving among family members would make sense if they wanted to, rather than each individual.

Tax free pension withdrawal to pay for care: Alongside a new Care ISA, the new pension freedoms could also be used to encourage people to save money for later life care by allowing any money taken out of the fund for care needs to be withdrawn tax-free. Removing the annuity requirement and 55% death tax could encourage pension funds to be kept to cover family care costs. Allowing some pension fund withdrawal to be tax free if it is used to pay for care, would encourage more people to retain some funds in the tax-free pension for longer, just in case it is needed. If they don’t spend it on care, it will pass free of inheritance tax to the next generation.

Auto-enrolment to encourage workplace care saving plans: Ultimately, there is another route to help care funding, especially for those without large savings. We certainly need a range of options to solve a crisis on this scale. With auto-enrolment potentially bringing every worker into pensions for the first time, there is an opportunity to use this to start funding social care too. The Government could eventually adjust auto-enrolment to cover more than pensions, or even build a national care insurance contribution into auto-enrolment too.

Bringing Care Savings into workplace flexible benefits packages: In the meantime, there would be merit in encouraging employers to offer workplace savings plans specifically for care, such as the CareISAs. This could be part of a flexible benefits package, with an employer contribution to help workers of all ages and income levels save up for care costs.

No magic bullet – urgently need range of options so public know they need to save: The cost to society of failing to ensure money is set aside for future social care needs will put intolerable burdens on the NHS, on younger generations and on older people. There is no magic bullet to solve this crisis – we’ve left it so late. The best we can do is start to tell people that the state won’t pay, help them realise just how little the state covers and that they are likely to need their own funding as well. Whether it’s ISAs, pensions or auto-enrolment, the Government must incentivise saving for social care and this can ultimately help millions of middle-income families, not just those who are well off.

February 2, 2015   2 Comments

Social care crisis – urgent action needed

20 January 2015

  • Action to address care crisis cannot wait any longer
  • Elderly people are suffering due to council and care company cost-cutting
  • All parts of the system are failing and Government has not yet offered solutions
  • Tax incentives to help families save for care costs are needed as £72,000 cap is too high for affordable insurance
  • Care ISAs, Family Care Plans and Workplace Savings free of Inheritance Tax
  • Use auto-enrolment and new free Guidance to kick-start care savings

There is no money set aside for care:  Even though demographic trends clearly signal a dramatic rise in the numbers of older people needing long-term care, there is almost no money set aside to pay for the care they will require.  Millions of baby boomers are currently reaching their 60s and will need care in the coming twenty years or so, yet the Government has not planned for this huge looming cost. Estimates suggest that around half the population over age 65 will need to spend at least £20,000 on later life care, and one in ten will spend over £100,000.

Long-term care funding is one of the least understood parts of the health and care system.  In fact, many people mistakenly believe that the Government will pay their care costs.  But social care is the responsibility of local authorities, not the free NHS.  The difference between social care and healthcare is not easy to define, but as an example, someone with cancer is likely to qualify for healthcare funding with care provided at taxpayers’ expense, while someone with dementia may not be considered to have a ‘health’ need and gets no help from public funds at all.

Cash-strapped councils and indebted care companies are desperate to cut costs but this cuts quality too.  Local authority budgets have been squeezed and councils have slashed their social care spending by 26% in the past four years.  This affects all aspects of the care system.  Whether it is funding for care homes, where local authorities are not paying the full costs of care and are forcing private payers to subsidise publicly funded residents, or homecare, where councils have cut the time for home visits to only 15 minutes in many cases, the system is not being funded properly.  Private care companies are often highly indebted, both care home operators and homecare providers, so there is constant cost-cutting pressure.  This affects the quality of care provided and also the conditions in which staff must operate.  Zero hours contracts and low pay are endemic, often with no pay for travel time or training, which leads to a transient workforce and lack of adequate care.

Healthcare and social care must be integrated.  Until the Government properly integrates social care with healthcare and insists on higher standards across the industry, the current crisis will only worsen.  This should be a major political issue, but it is not receiving sufficient attention.  The public is not being adequately informed of the problems and possible solutions, leaving families struggling to cope and elderly people at risk in a system that is failing on all fronts.

Families will need to prepare for some costs, but they need help.  In Scotland some social care is provided free by the government.  Elsewhere local authority care funding is subject to one of the strictest means-tests.  Most people will receive no help from the state until they have used up the bulk of their assets, causing significant distress to many families and leaving the majority of families to find huge sums at short notice.

Politicians have talked about this problem for years, but there is still no solution in sight.  Despite knowing that numbers needing care will rise inexorably, policymakers have not set aside public money, or encouraged private provision to pay for care.  The quality of care has suffered, many companies offering care are highly indebted and there is a crisis in the sector.

Products for care funding are inadequate.  There are some products already on the market to help people pay for care.  These include Immediate Needs Annuities, Equity Release and local authority deferred payment plans, but each has advantages and disadvantages and they only help at the point of need, rather than allowing people to make plans in advance.

The £72,000 cap is not a solution. The latest proposal designed to stop people losing their life savings or their home to pay for care is the £72,000 cap to be introduced from April 2016.  The state is supposed to step in once the cap is reached, to ensure nobody has to face catastrophic care costs, but most people will actually have to spend more like £140,000 on care before they receive any state help because the cap excludes.

  • £12,000 a year board and lodging costs for a care home
  • Any money spent on care before your council assesses your needs as severe
  • Money spent on a higher-fee care home or more homecare in excess of the local authority basic minimum
  • Any spending before April 2016
  • Even after state funding begins, the £12,000pa for board and lodging elements of care home accommodation will not be paid by the council.

Insurance up to the cap is not a viable solution.  Insurance companies have told the Government that they can’t develop an insurance solution to cover care costs up to the cap.  If insurance is not a realistic option, then other avenues must be urgently explored.  New products and approaches, together with new Government incentives, are urgently needed.

Encouraging saving for care and integrating health with social care could help.  In addition to a better integration of health and social care (the current distinction seems arbitrary and manifestly unfair) it is also important to help people prepare in advance for care spending if it is needed. I believe a savings solution will have to be part of the mix.

How could a savings solution work?

Extra tax breaks are needed to encourage long-term care saving.  This is justifiable because the cost to society of failing to ensure money is set aside for future social care needs will put intolerable burdens on the NHS, on younger generations and on older people.  Urgent action is needed to head off a disaster that is clearly on the horizon.

Tax free pension withdrawal if used for care:  The new pension freedoms could encourage people to set aside money for later life care.  Now that the annuity requirement has been removed, and there is no 55% death tax, pension funds could help cover care costs.  Many people reaching retirement have tens of thousands of pounds in their pension funds but if they use this to buy an annuity, they will have no money to pay for care.  Allowing people to withdraw money from their pension fund without paying income tax, if it is to pay for care, would encourage them to retain some funds in the tax free pension wrapper for longer, just in case it is needed.  If they don’t spend it on care, it will pass free of inheritance tax to the next generation as the 55% pensions death tax has been abolished.

Care ISAs – IHT free: The Government could introduce a separate annual allowance for ISAs that are specifically earmarked to pay for care.  Launching such ‘Care ISAs’ would itself help people realise the need to save for care.

Family Care Savings Plans – IHT free:  Another possibility is for families to save collectively for the care needs of their loved ones.  For example, parents, siblings or children might join together to build up a fund in case one of them needs care.  The probability is that one in four people will need care, but nobody knows in advance which one.  Tax breaks to incentivise this kind of saving, perhaps allowing them to be passed on free of inheritance tax, would help.  There is a role for insurance with such savings plans – which might also include some ‘catastrophe insurance’ to pay out if more than the expected number in any family or group actually need care.

Auto-enrolment to encouraged workplace care saving plans: Alongside auto-enrolment, it might also be helpful to ensure that employers are encouraged to offer the option for people to save in a workplace savings plan that is set aside specifically for care.  This could be part of a flexible benefits package, which receive an employer contribution.

Use Pensions Guidance to provide information and education:  It will be important to ensure that the Government’s ‘Pension wise’ guidance tells people about planning for care.

So, the message to the Government is that our care system is in crisis, there is no money set aside either publicly or privately to fund later life care adequately, and the time to address this crisis is now.  Social care in this country is failing, radical action is long overdue.

January 20, 2015   1 Comment

We need tax breaks for care saving, not more means-testing

4 September 2014

  • More means-testing and tax increases will disincentivise private income and could worsen looming care crisis
  • We need incentives to encourage people to save for care – Care ISAs and tax-free pension withdrawals, plus inheritance tax exemption for care savings
  • Health and social care budgets must be integrated to provide fairer system

Radical reform of social care is required: I welcome the report released today by the King’s Fund, which highlights yet again the flaws in our system of social care.  It is absolutely clear that radical reform of the care system is necessary to address the need for dignified care as the numbers needing care are set to soar in coming years.

Need fair partnership between state and individual:  The King’s Fund report is right to raise the debate about how to fund social care fairly in future, but the proposed solutions could make the situation worse, rather than better, in the longer term.  We need a fair partnership between the individual and the State. A proper review of how to integrate health and care spending is needed, to identify the priorities for public spending and how to fund this fairly. This would allow for an increase in early intervention and more at home care, which can reduce the numbers needing more costly NHS interventions as a result of avoidable falls.

Reform state pension and increase age of eligibility for benefits rather than more means-testing:  However, the King’s Fund proposal to take away pensioner benefits and limit them only to Pension Credit claimants is not a solution.  Indeed it could increase the taxpayer costs of care as it is like cutting the state pensions of those who have saved and penalising those who try to be self-reliant.  Increasing the age of eligibility is an issue to consider, and integrating the free benefits into the state pension would also make sense, so that they become taxable, but extending means-testing is dangerous.  Trying to provide free social care and funding this by more means-testing within the current health and care framework is like sticking a plaster on a wound that is getting worse underneath. Covering up the issue will not really solve it.

Need savings incentives urgently:  It is really important to help people save for later life care needs – there are absolutely no incentives in place for this at the moment and no specific products either.  By extending means testing, those who save for care are simply going to be penalised further which will result in fewer people saving and more  needing taxpayer support.  Nobody is saving to cover care needs and no new products are available – by offering tax incentives such as more ISA allowances, or inheritance tax breaks, savings for care could be kick-started.

Care ISAs and tax-free pension withdrawals:  I have been calling for the Government to introduce a new Care Savings Allowance for the over 50s to allow tax free savings towards care for themselves or their relatives. A ‘Care ISA’ allowance, or tax-free pension withdrawals to pay for care.  Even if care funding is radically reformed, individuals will still have to fund a portion of their care costs themselves so it is vital that we help families put money aside just in case.

NHS cannot cope with the costs of care:  This issue is not just about looking after older or disabled people. It will affect families up and down country and ultimately all of us, because the NHS will be unable to keep picking up the pieces of our broken social care system. Getting social care right, helping people plan and prepare properly and look after themselves will ultimately save money and resources in the NHS. Failure to reform care will end up costing us all far more when the NHS safety nets break down.

Need to integrate health and care budgets and ensure tax incentives for private saving:  Without the additional funding that would come from proper integration of our health and social care systems, plus incentives for people to save for their own care, our increasingly ageing population will still be at risk. Inheritance tax breaks, ISA incentives and encouraging people to use the new pension freedoms in ways that ensure they leave some money in their pension wrappers in case they need to pay for care, would finally start a savings culture for care that is long overdue.

September 4, 2014   1 Comment

Budget ISA moves – ISA savings for care

21 March 2014

  • Nicer ISA savings – what could be NISA!
  • And how about a Care ISA?

As the dust starts to settle a little following the sudden Budget improvements to Individual Savings Accounts (ISA) rules, I thought it might be helpful to note down some more thoughts.  Wouldn’t it be great if the new found freedoms could be used to help fund social care.

An ISA tax free savings account, designated to pay for care costs, could help with the coming social care crisis and also give families some peace of mind about covering the expense of infirmity in old age.  An added incentive to encourage more people to pre-fund possible care needs – whether for themselves or a loved one – would be to allow any designated care funds to be passed on free of inheritance tax, if not needed for care and kept in a fund that will still be used to fund care needs for other family  members.

This would enable the savings industry to design longer term products to help people save for the possibility of needing care in later life, rather than suddenly finding they need large sums of money which have not been budgeted for.

Three or four years’ worth of ISA savings, of £15,000 a year, would result in a fund that could cover most people’s care costs in later life.  Once care is needed, the fund could then be drawn down slowly, or switched to cash.  I do hope the industry will rise to this challenge now that the Government has opened the door to more flexible savings.

Now that ISAs will be more flexible, with people being allowed to shelter much more income from tax and also free to choose whether they want cash or stocks and shares in their savings fund, the position of savers has been significantly improved.  Whether you have larger or more modest sums to set aside, or perhaps if you receive an inheritance or bonus payment, you will be able to build up more savings over the long-term in a tax-free account.  Young people saving for a house can keep the money in cash, those in retirement who need to live on their savings likewise, but those who have savings for the longer-term will be able to put the money in stocks and shares and then switch into cash as and when they feel it is appropriate for them.   There is not yet any funding vehicle to prepare for care costs, using the new ISA flexibility might just spur the industry to develop some.

March 21, 2014   2 Comments

15-minute care visits are an affront to decency

7 October 2013

  • Care staff earn less than £1.50 for each 15-minute care visit
  •  Each visit earns less than a cup of coffee as private care firms and councils cut costs
  •  Such social care cutbacks are an affront to decent standards of care
  •  Social Care crisis is deepening

 15-minute care visits are putting patients and careworkers in an impossible position:  The Leonard Cheshire charity report (see link here http://www.lcdisability.org/?lid=8843 ) highlights the degrading impact of 15-minute social care visits on lonely, frail elderly people.  But the social care crisis is not just impacting those on the receiving end of such ‘care’.  The private sector careworkers are themselves being put in an almost impossible position.

Staff paid less than a cup of coffee!  A careworker earning £10 an hour will often earn just over £1 for each 15-minute visit.  Those dedicated social care staff in the private sector, who are employed on or near minimum wages, with zero hours contracts, are being expected to try to cope with such unreasonable demands, without even earning enough for a cup of coffee.  Is this really what Britain believes is appropriate?

Low wage work will pay £2-00-£2-50 per visit:  How can this be?  Care staff are often paid only the minimum wage, but let’s assume a careworker is paid £10 an hour.  They will be paid £2-50 for a 15-minute visit – perhaps to get a client out of bed, washed, on the toilet and into a chair.  However, most of these dedicated workers are not paid for their travel time and not even reimbursed for the cost of their travel.  So, if they make four 15 minute visits, they do not actually earn £10 for an hour of work.

Not paid for travel time so they earn less than £1.50 for each visit:  For example, if it takes ten minutes to go from one house to another, they will have spent one hour and 40 minutes of time for the four 15-minute appointments, but will receive just £10.  That works out at £6 per hour – or just £1.50 each visit.

Not reimbursed for travel costs either:  But if they are travelling by car, they must also pay their own petrol and motoring costs.  That means much less than £1.50 a time.

Puts those in need and those trying to help them in almost impossible situation:  So, 15-minute visits are not only putting the person needing care at risk of being poorly served, the staff trying to cope with this penny-pinching system are being expected to cope in almost impossible conditions too.

Pitiful choices for pitiful pay:  This is another wake-up call highlighting the extent of the crisis in our social care system.  For an older housebound member of society to be forced to choose whether to go thirsty or go to the toilet is a hallmark of failure.  To put dedicated staff in a position where they have to cope with such choices too, for pitiful pay, is an affront to decency.

Careworkers need better working conditions:  We need to properly address the inadequacies of leaving social care to cash-strapped councils, instead of promoting proper standards, we will be failing millions of the most needy members of society.

Social care is vital just as healthcare is:  Social care should be valued as the vital service that it is.  Healthcare is funded far better.  It is time for us all to wake up to these challenges.

October 7, 2013   No Comments

Who cares – zero hours contracts for careworkers while care crisis worsens

Zero hours contracts for private sector careworkers are not conducive to delivering quality care

Trying to fund care on the cheap compromises quality

Treating care staff decently will require funding reform as care crisis grows

As the party conferences shine a spotlight on the problem of zero hours contracts, this seems an opportune time to highlight the working conditions of Britain’s private sector careworkers.

Zero hours contracts are standard in this industry.  The staff are also usually expected to fund the time and costs of travelling from one home to another.  Often earning around the minimum wage, yet carrying out stressful, intimate and vital work for increasing numbers of frail citizens – this is a real indictment of our care system.  As more and more people will need care in our aging population, this needs to be addressed urgently.

The problem stems from our failure to fund social care.  It has always been treated as the ‘poor relation’ in the health industry.  Yet poor social care can be just as life-threatening as poor medical care.  In the past, care has been left to councils or families, but cash-strapped councils cannot cope with increasing demands and families are unaware and unprepared for the costs they will face.  Nobody is saving to fund social care in later life, because they do not realise they need to and there are no incentives on offer to help them plan.  Pensions will not cover social care needs.

It is vital, however, that when funds are found, the quality of care must be adequate.  Ensuring decent working conditions for those providing care is long overdue.  This includes funding better training for careworkers but must also encompass adequate pay and improved working conditions.

None of us wants to become dependent on others when older, but some of us will.  Whether it is for ourselves, or our loved ones, we surely want to know that care will be provided by people who are treated well and feel valued.

Can someone on zero hours contract and minimum wage feel truly valued? Yes, some people do like the flexibility of a zero hours contract, but most careworkers would far rather know they can rely on a minimum level of income each week.  That will require a new mindset in the industry.

Now is a tremendous time to reform standards of employment in this country’s social care system.  The numbers of careworkers required in future will soar, which can provide part of the answer to rising unemployment, but working conditions must improve.  More of us will have to pay others to look after loved ones or ourselves and want to know that the care is of a good quality.  Can that really be achieved when those workers are not given decent working conditions?  This is an issue of immense national and social importance.  What’s your view?

 

September 16, 2013   1 Comment

Care crisis demands urgent action – savings incentives would help families prepare

Yet another report highlighting the scale of the social care crisis.  The research by NFU Mutual shows that older generations are increasingly facing crippling care costs in later life that they have not prepared for.  Families are finding that their lifetime savings are at risk if they become ill in the wrong way.  Those who have cancer or other illnesses that qualify for NHS treatment will have all their care covered by taxpayers.  Those unlucky enough to develop dementia or other illnesses will not qualify.  Their needs are assessed by local authorities and cash-strapped councils are cutting care provision.  The social care means test is the meanest of all, with any assets worth over £23,250 including the value of the family home, disqualifying people from any council funded care and even for those of more modest means, care is increasingly being restricted only to those with more severe needs.

 

Families are being failed by the current system.  It is true that the Government has belatedly woken up to the crisis, but the measures introduced so far do not rise to the scale of the immediate challenges.  The long-awaited Dilnot ‘cap’ is too high but also only provides a longer-term framework, rather than a real here and now solution.

 

The £72,000 cap only covers care costs at council rates (the most basic), only applies to those who already have ‘substantial’ care needs, does not include the costs of board and lodging in a care home and does not even begin until 2016.  Therefore, all care spending before that, or outside those qualification criteria, will not count towards the new cap.

 

It is true that the Government will also introduce a scheme to pay people’s care fees and the taxpayer will take a charge on the house, so it only needs to be sold when the person dies, rather than while they are still alive.  But of course that still means the value of the family home will have to go to funding care needs, rather than family inheritance.

 

This is not necessarily unreasonable if people are warned that this could happen and given a chance to save separately for their care needs if they want to do so.  A savings plan which covers family care costs, separately from property value, might appeal to some people, if they knew they needed to prepare.  There is a huge information exercise urgently required to help people understand what responsibilities they will have to shoulder.

 

The ideal would be a savings incentive scheme to encourage social care provision for families.  Perhaps a separate annual ISA allowance, that could only be spent tax free if the money was used to pay for social care – either for oneself or someone else.  The Chancellor should consider this in his next Budget.

 

We have a pensions crisis, as millions of people are not saving enough for a pension, however the social care crisis is far worse.  There are billions of pounds set aside for pensions, there is almost no money saved up for social care.  And yet, when it comes to the point of need, the money has to be found.  Unlike pensions, where it is possible to wait a bit longer or work a little more and live on a state pension for a time, once someone needs social care they cannot wait.  The money has to be found.  And social care costs huge sums which a pension cannot cover.

 

The sooner we wake up to the need to prepare in advance for care, the fewer families will face the difficult task of finding out

 

September 4, 2013   1 Comment

Pensions are not the best way to save for care

 

  • Pensions are not the best way to save for care –  we all hope to need a pension but only one in four will need care
  • Most wont reach the cap and will pay for all their care – that may be socially necessary but we need to prepare for it
  • Cap won’t cover all the costs and deferred payment plans should be provided for home care too, to avoid expensive equity release

As the Government unveils its consultation on the Dilnot reforms, here are my thoughts:

1.  Pensions are not the best financial product for covering care costs: As regards financial products, most people do not have enough saved up for a good early retirement income, let alone having money left over for care.  The very well-off will be able to manage but for most middle income groups, pensions cannot cope with care costs.  In any event, most people will not actually need care.  Only one in three or one in four of us are expected to have later life care needs, so it could be a a waste of money for each person to save individually for something most of them will never need.

2.  £72,000 care cap is too high, most will have to cover all their care costs:  It’s important that people realise the newly announced cap on social care costs, while welcome, is set so high that most people will still end up paying for all their care.  The £72,000 is only for basic level, local authority rate care not a higher standard and it will not include the cost of board and lodging which is likely to be an extra £12,000 a year on top of any care costs.  Therefore, most people will spend over £100,000 before getting any state help and will most likely pay for all their social care themselves.  That may be socially necessary, but it is important to be honest about the true scale of the responsibility that will fall on families or individuals.  It is, however, a positive step forward that the means-test threshold is being raised from the current £23,250 to a more reasonable £118,000 including the value of the house.

3.  Insurance likely to be expensive as most will not reach the cap:  The cost of providing care insurance is likely to be very expensive and past products have all failed.  However, saving collectively for care makes more sense.  Not everyone will need to spend money on care at all, but families will want to have a savings pot saved up just in case one of them needs care at some time.  This could help them cover care costs even before they reach ‘substantial’ need too.

4.  Government should introduce special tax incentives to save for care – such as Care ISAs:  I would urge the Government to introduce new incentives to help people save up for care either for themselves or a loved  one in a tax free or ISA format.

5.  The care cap clock only starts ticking when care needs are ‘substantial’:    Only those with substantial needs will start accruing credit towards the cap, therefore those who have more moderate care needs either in their own home or a residential home, will have to pay all the costs themselves.  It is good to have national standards and end the current postcode lottery, but it is also important not to set the bar too high.  Having an assessment will also be useful to help signpost families to sources of information and advice which can be vital in preventing more severe needs, or planning for the future costs.

6.  Government’s proposals will do nothing for the care crisis that already exists:  The reforms will not start before 2015/16, so there is nothing for families facing care costs in the next few years.  The risk of more people having to sell their homes remains.

7. New deferred payment plans should be much better value than equity release, although councils currently provide loans without interest and fees:  It makes sense for the Government to try to reduce the costs of borrowing against one’s home, since equity release is usually a very expensive option.  Currently, around 40,000 people a year sell their home to cover care costs.  They usually are not aware that all local authorities are already obliged to offer deferred payment plans to anyone who asks for one, with no interest or charges.  Of course, most authorities fight hard to avoid having to pay for these and it is not clear why taxpayers should have to subsidise interest free loans.  The proposals for a ‘not-for-profit’ system are sensible, but it is important to recognise that the home will still need to be sold, just not while the person is alive.

8.  Will deferred payment plans also help those needing care at home and with moderate needs?:  The deferred payment plans are only being made available to people in residential care. However those who need looking after in their own home still need to find the money and might therefore also need access to funding for care.  In addition, people with less severe needs will still need help to cover the cost of home-care and, rather than having to sell their home or take out expensive equity release plans, the Government should consider extending the deferred payment plans to others too.

The bottom line:  The bottom line of these proposals is that it will be necessary for families to put money aside for care.  We do not know which one of us will need care in future, but we do know that many of us will have to spend huge sums before the state covers the costs.

July 19, 2013   1 Comment