Helen Morrissey looks at the issues people face when it comes to long-term care and asks what can be done to make sure people get the advice they need
Long-term care has proved a difficult subject for society to get to grips with. Funding care home placements has placed a huge strain on government finances, while it is a subject that many individuals don't wish to address with their families never mind anyone else.
Added to this, a lack of clarity in terms of what help you can expect from the state coupled with a dearth of products to help fund care means that families often don't know which way to turn. Long-term care funding seems to be the elephant in the room that we are ignoring at our peril.
Bringing clarity to this situation has been the subject of much talk over the years, but as yet very little action has been taken.
But in July 2010, the Dilnot Commission was formed to provide recommendations to the government on the best way forward. It is due to report back this July, but it is clear that the conundrum of long-term care funding will take some time to solve.
As it stands, a pensioner in England will get full state funding of a care home if they have assets of less than £23,250, including property. In Wales, the figure is £22,000 while in Scotland it is £22,750. Those with assets above this amount will have to fund their own care. If the elderly person's assets are largely tied up in the home, then they may have to sell it in order to meet the cost of their care home.
With care home costs eating up as much as £50,000 a year, it is clear to see that mounting costs can result in many sleepless nights for the elderly person and their family.
Chris Horlick, Partnership's managing director of care, says the situation is made worse by confusion about what the state will provide. Many people going into long-term care believe their care costs will be met by the state.
He says: "As it stands, there is a real lack of understanding by the public at large that social care is different to health care. Long-term care is something that can be planned for yet there is real confusion as to how you pay for it once you get to the point of need.
"It is often a distress purchase and there is little information about what is an incredibly opaque system. For instance, there are big regional differences in terms of the levels of funding and help you will get. The whole reasoning behind the Dilnot Commission is to sort out this confusion."
The role of the adviser
While it is true to say the current system is complicated, clients can do much to alleviate stress by consulting a financial adviser to discuss their options. According to Partnership research, 130,000 people went into long-term care in 2009. Of these 41% were self-funders and only 14%of them received financial advice.
"The main challenge we face is actually getting people to seek advice," says Symponia's managing director Janet Davies. "People don't realise that there are things they can do. People need to realise that advice does exist."
So how can the adviser help at this point in time? As it stands, you cannot buy a pre-funded product to help with the cost of long-term care. Indeed, the only products you can currently purchase are immediate-care annuities which can only be bought at the point of need.
However, NHFA managing director Nick Tyler believes there is a lot that advisers can do improve the clients' experience.
"The big issue is that the majority of those going into care aren't getting appropriate financial advice," he says. "A lot of people don't even know that advisers specialising in long-term care exist as no one plans for this and it is a difficult subject for families to talk about. People need help getting their finances in order when they go into long-term care. For instance, you need to make sure that a lasting power of attorney is in place and that any wills are up to date."
So what can be done to help those in need access appropriate financial advice at this time? Horlick believes that when the Dilnot Commission reports back, it should include provisions to enable local authorities and care homes to point potential clients in the direction of qualified financial advisers.
According to Horlick, this is currently done by less than 6% of local authorities, while 80% of care homes currently have no relationship with advisers in the area.
Tish Hanifan, chairperson of The Society of Later Life Advisers (SOLLA), agrees saying that as it stands self-funders are left without advice at this crucial time.
"There's a big gap in the market when it comes to self-funders as they are often left to just get on with it," she says.
"While I understand the local authorities can't help them more, they can play a role in terms of helping these people access the details they need. If self-funders run out of money, then it is us who have to pick up the tab and local authorities need to realise this."
Tyler agrees that such a process would help matters, but remained doubtful as to whether Dilnot would take it up.
He says: "I would like to see more advisers working with local authorities and care homes though I understand they can't be seen to be recommending individual advisers.
"I think this is where the SOLLA has a key advantage in that it is a not-for-profit organisation. SOLLA advisers have all been accredited to a higher level, even than CF8, and they are monitored on an ongoing basis. The fact they are not-for-profit also means local authorities should feel more comfortable referring people on to them."
Ways of paying for care
So once the client has finally got themselves in front of an adviser, what are the possible funding options for long-term care?
Any pre-funded market died out in the UK several years ago and there are only a small number of providers offering immediate-need annuities. According to Davies, immediate-care plans "should be explored by every family in this situation as they form the lynchpin to a long-term care plan."
But is there not room for more product innovation in this area? Could we ever see the return of pre-funded products, for instance?
"The issue with pre-funded products is that you don't know if you will ever need it," says Horlick.
"We should be able to develop products that pay out either way as the further you are from the point of need, the harder it is to predict how much it is likely to cost. That's why point-of-need products are more popular."
He also argues self-funders purchasing immediate-needs annuities should receive some financial incentive as reward.
"I think we need to see more incentives coming through here," he says. "For instance, if you purchase an immediate-care annuity, you won't run out of money and fall back on the state - shouldn't this be rewarded? They could have IHT thresholds raised."
Another area attracting increased attention is equity release. While these products have had something of a chequered history, the perception of these products has improved and there is increased interest in them as a means of ¬funding long-term care.
Davies says: "I don't believe that equity release is the devil. It certainly has a role to play as long people understand what they are getting into. It is becoming a more prevalent way for people to fund care so that they can stay at home."
Andrea Rozario, director-general at Safe Home Income Plans, welcomed the move, saying that the huge housing price inflation enjoyed by baby boomers could provide a way of funding long-term care.
"We are seeing an increasing interest in how it can be used," she says. "Equity release can help with both domicillary and residential care and it is certainly climbing the political agenda and this will affect product innovation.
"We are awaiting the outcome of Dilnot, but we feel the role of housing wealth needs to be considered as an option. The baby boomers have amassed an incredible amount of housing wealth and we know that one in four 65-year-olds will have some long-term care requirement."
So the long-term care market undoubtedly faces many challenges. First of all, people don't want to talk about it. Secondly, they don't know where to get advice on it. Thirdly, they don't know what their funding options are.
However, as the need for long-term care continues to grow, then more needs to be done to help people receive appropriate financial advice.
It is clear that local authorities and care homes have a role to play in alerting families to the presence of financial advice and processes need to be put in place to enable them to do that.
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