PENSIONSANDSAVINGS.COM

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.