The government's long, long-awaited green paper on care funding is a chance to rethink how people interact with the care system and, writes Stephen Lowe, ideally to encourage a higher level of planning for later life
Financial stability and security are key personal goals for later life so it is ironic - and worrying - that the care homes market appears so fragile and unstable. Four Seasons Health Care Group, which has more than 300 care homes in the UK, recently fell into administration, joining three other major care home operators that have put themselves up for sale in the last year.
This is a diverse sector with a mix of large and small providers, both commercial and ‘not for profit' all competing for business. Yet many in the sector are feeling the squeeze from a combination of tighter regulation, rising wage costs and a fall in the rates local authorities are prepared to pay.
It is estimated that more than 400 care home operators have become insolvent in the last five years, threatening disruption and closures that impact on some of the oldest and most vulnerable in society.
Policy paralysis appears to be adding to the air of crisis. Plans to introduce a cap on care costs have been abandoned. Extra funding that is being gathered through a precept on council tax is seen as a sticking plaster rather than the major surgery required to provide a sustainable solution to the deepening funding crisis. New government proposals first promised in 2017 have been delayed multiple times and are now not set to appear before the summer.
Given the environment, it is perhaps not surprising that care is a topic that most people give little thought to.
Research carried out among the over-45s for Just Group's annual Care Report consistently shows most have never spoken to friends or family about potential future care needs. That reluctance extends to thinking about future care costs too, with only about one in 20 saying they have made financial plans to pay for care if they need it.
Typically, the first involvement in the care sector comes with the realisation that an elderly parent or relative can no longer look after themselves without professional help. Given the lack of foresight, it is perhaps not surprising that many are shocked or surprised about how complex and expensive care is and the lack of support and information that is available.
The government's long-awaited green paper is a chance to rethink how people interact with the care system and ideally to encourage a higher level of planning for later life. The proposals need to tackle the current confusion over where the line is drawn between State provision and individual responsibility.
Being clear with people about their potential future liabilities is the only way to encourage more to take steps to actively plan for future care costs. Care appears to be a niche area in terms of financial products but the products that do exist focus on providing stability and sustainability.
Care funding plans are a type of medically underwritten annuity that provide tax-free income when paid directly to a care provider. In the event of a change of care provider, the income can be redirected to a new provider.
They aim to address the problem of the unfortunate few who end up facing high care costs that can erode the value of even substantial estates. By guaranteeing a level of income for the care provider for as long as it is needed, care funding plans can safeguard the value of other assets from being depleted to meet care costs, helping with estate planning.
Encourage and incentivise
While care funding plans can be a useful tool at the point of need, the forthcoming proposals really need to encourage planning and put in place incentives for people to earmark funding for care earlier in life.
In an ideal world, those heading into retirement or even in the last years of working should be clear about their responsibilities and have discussed the options. This is not just purely a financial matter and includes conversations with family about what they would like to happen and also legal documents such as wills and powers of attorney.
Currently, just over half of over-45s say they are delaying making financial plans to pay for residential care while they wait for new funding rules to be revealed. The number delaying is higher for over-75s - at nearly seven in 10.
Auto-enrolment into pensions show us the success that can be achieved by the government setting out a clear path of what ‘good' looks like. The current malaise needs to give way to positive action to enable individuals, the care sector and local authorities to plan for a better future.
Stephen Lowe is group communications director at Just Group
Old age dependency ratio ‘outdated’
25 months since stated intention to publish
£4.5 trillion of property wealth
Equates to seven million people