From Ros Altmann:economist and pensions,
    investment and retirement policy expert

  • pensionsandsavings.com

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

    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


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