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

  • pensionsandsavings.com

    Hammond could be first Chancellor to help families with social care saving incentives

    Hammond could be first Chancellor to help families with social care saving incentives

    20 November 2016

    Hope Chancellor’s Autumn Statement will address
    one of biggest social issues of our time

    • Philip Hammond needs to introduce incentives to help people prepare for care
    • Massive failure of political courage by previous Chancellors and a betrayal of British families
    • Britain has been sleepwalking into a social care crisis – it’s time to wake up!
    • Billions set aside for pensions – but virtually nothing to help fund later life care

    Let’s have Care ISAs, employer care saving plans, eldercare vouchers

    • Politicians have failed to plan for population aging and rising life expectancy – even though it’s been happening for decades. We’ve had reviews, scandals, exposes, recommendations but still no proper funding plan
    • Care has been left to cash-strapped councils keep who keep cutting provision
    • There has been lots of focus on pensions, but nothing for pre-funding of social care
    • Chancellor should introduce incentives to help families to save for social care, rather than leaving them in the dark about the costs they may face
    • Chancellor could also incentivise employers to help with social care with tax breaks for care saving plans or elder-care vouchers
    • Politicians have adopted the ‘ostrich approach’ burying their heads in the sand and leaving future Governments to deal with the problems caused by today’s lack of action
    • Social care for older people is pushing NHS to breaking point – and that’s before the baby boomers start needing care in coming years
    • The NHS was designed as a make you better service, not a look after you for ever service – it cannot keep picking up the pieces of our broken care system

    There’s no magic silver bullet to solve care inadequacies – having been left so long it needs multiple approaches.

    Will Philip Hammond be the first Chancellor to introduce tax incentives to help families prepare for care costs in advance? He could show huge political courage by starting to address this enormous crisis. Signalling to families that millions of them will need some money in later life to pay for care needs, not just pensions, should have been done years ago, but successive Governments have failed to offer any help to families to prepare for care. Government spends billions on private pensions tax breaks, and there is a State Pension to provide a base level of support. But there are no incentives to set money aside for care costs. The Autumn Statement could introduce new initiatives giving tax breaks to encourage people to allocate existing or new savings for care. This would help more people recognise the need to keep money back for later life care costs. Currently, they don’t know.

    • Special ISAs for Care Savings: Chancellor could introduce a new type of ISA to help people save for care and could encourage people to switch existing ISAs into Care ISAs. Perhaps up to £50,000 per person which would get an added Government bonus if the money is earmarked specifically for care. The money could perhaps be passed on free of Inheritance Tax to form a Care Savings ISA for the generations if not used.
    • Family Care Savings plans: Baby boomers are now reaching their 60s, but have no idea they may face shocking costs of later life care. Encouraging families to save for care will help explain to families that Government won’t cover most care costs: The NHS is already at breaking point as it picks up the pieces of our broken care system, and that’s before huge numbers of baby boomers, now in their 60s, start needing care in future. Government could offer tax incentives for ‘family care savings plans’.
    • Tax incentives to keep some money in pensions, such as tax free withdrawals for care: Many baby-boomers have money in their pension funds and now have more freedom to leave their money invested, rather than buying an annuity. The Chancellor could allow tax-free withdrawals from pension funds if the money is spent on care.
    • Tax incentives to encourage employers to help staff save for later life care: A pension is not the only money you may need in retirement. Encouraging employers to contribute to a care savings plan for their staff, with similar tax breaks to pensions, could help people build up funds for later life care.
    • ‘Eldercare’ vouchers to help staff with care costs: Employers could offer elder care vouchers (along the lines of childcare vouchers) which get tax relief as an employee benefit.
    • Stamp duty breaks when older people downsize their home: Government could help ‘last time buyers’ downsize their home. Perhaps with a one-time stamp duty exemption on last home purchase. This could free up some money that could be spent on care in future years.

    10 failings of social care:

    1. No financial or tax incentives to help families prepare for care costs in advance: There are significant incentives to help people build up private pensions, but no Government incentives for care savings. There is employer help for pensions and also the state pension to provide a base, but there is nothing for later life care needs.
    2. Triple cutbacks in publicly funded care is betrayal of British families – It is estimated that 150,000 fewer people are receiving help at home than five years ago as councils impose triple cutbacks: (a) only paying for those whose care needs are already substantial; (b) cutting the amount of care provided per person (such as 15 minute visits); (c) failing to pay the full costs.
    3. Health lottery – depending on what’s wrong with you, taxpayers may pay all your costs via the NHS, or none if your care needs come under council control. Most people assume the NHS looks after elderly people but they are often left to pay for care themselves.
    4. Postcode lottery – Many councils are cutting back care spending, leaving care homes or domiciliary care companies unable to cover their costs.
    5. Social care is the meanest of all means tests, and families with savings face a double hit – councils will only pay for care if people have less than £23,250. This could include the value of their house, unless they or their partner is still living there. While those with no assets get care costs covered by council taxpayers those people who have to pay for their own care are hit twice. Councils are not paying enough to cover the costs of care for those who do get public funding, so those who get no public money must not only cover their own cost, they also have to pay extra for other people’s care too, to make up for council underfunding.
    6. Government hasn’t told the public about the need to prepare for care costs – Government has tried to pretend it is sorting out the problem when in fact the crisis is getting worse. Families are being left to find funds when needs suddenly arise rather than having to prepare for care in advance. Political spin is does not help those in dire need.
    7. Lack of cross-Departmental approach – addressing the care crisis will require several Government Departments to work together – Department of Health, DCLG, Treasury and Housing. The NHS should work with DCLG to properly integrate funding for health and care needs of rising numbers of older people. Treasury must urgently introduce incentives to help families save for care. Housing Ministers must ensure building of suitable homes for ‘last time buyers’ to downsize to. If people stay in unsuitable homes, rather than being able to move to good quality, smaller, user-friendly housing, they are more likely to need social care.
    8. Lack of integration between health and social care services leaves the NHS paying for those who develop health needs due to lack of care – In Torbay and South Devon, the integration of health and social care has seen emergency hospital admissions for the over-65s almost eliminated. But in most other areas, failure to fund social care, often results in older people ending in the NHS – the most expensive care setting.
    9. No incentives for councils to save money to NHS – The current system actually incentivises councils to push extra costs onto the NHS. The longer councils can delay hospital discharge, the less they will have to pay for an elderly person’s care. This ends up costing the taxpayer far more, as well as being worse for older people. This failure is leaving NHS resources stretched to breaking point, a lose-lose situation for us all.

    No incentives for NHS to save money to councils e.g. GPs could help patients by recommending preventative measures –currently GPs are not incentivised to prevent care needs, rather than waiting to treat them after problems arise. It could save money and improve people’s lives if GPs could recommend personal alarms, handrails or a bit of home care.

    2 thoughts on “Hammond could be first Chancellor to help families with social care saving incentives

    1. I suggest that the insurance companies should set up policies, similar to life cover that can only be claimed should the insured need care in later life in a care facility. If the insured where to die before ever needing old age care then the policy would not pay out anything however if they do need care then the insurance would fit the bill. I think this would be a very attractive policy for most people as you hope you never need it but if you did it means that your home would not have to be sold and it would be possible to leave something for the children. The countries children will already be paying off the debts of earlier generations and this would mean at least they potentially could get something if their parents had to go in a home.

    2. Tax breaks seem to me to be essential. My father, who had Parkinsons, was desperate to stay at home, so he finished up with a full time live in carer plus others coming in as two people were required to lift him, even though the local authority had provided lifting equipment. If he hadn’t died half way through, the annualised cost would have been £72,000, in fact substantially more than a typical full service nursing home at around £50,000 but much more pleasant for him. For even a reasonably well off family, that cost (at home or nursing home) could only have been sustained for a short period. For his pension to have been paid free of tax, would have made this sustainable for at least a while longer.

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