Tony Clements is an IFA with Park Row Corporate and Private Clients
The government published its Green Paper on the future of care, entitled ‘Shaping the Future of Care Together' on the 14 July 2009. Government research in the Green Paper shows that the expected lifetime cost of care for someone who is 65 today is:
For a 65 year old female £40,400 and for a male £22,300. So the average is £31,700
The report starts by looking at what it considers is wrong with the current system and the challenges facing society today, including:
• Current system is a result of a series of incremental changes rather than one bold reform.
• The requirement for those who can pay for themselves to do so even if this means selling their home to pay for care until they have only £23,000 left.
• Wide range in quality of care offered around the country.
• Different local authorities apply different criteria in assessing the care an individual is entitled to.
The Government sets out its vision as being ‘fair, simple and affordable'. The Green Paper says there are six things that run through the report and that everyone in the country should be able to expect. I have précised as follows:
1. Prevention Services: To be able to remain independent for as long as possible.
2. National Services: To have your care and support needs and costs of those needs assessed in the same way wherever you are in the country.
3. Joined Up Services: All the services you need to work together.
4. Information and Advice: Support system that is easily understood and accessed.
5. Personalised Care and Support: Services based on your personal circumstances and needs.
6. Fair Funding: Everyone who qualifies for care and support from the state will get some help meeting the cost of care and support needs.
The headline grabbing extract from the Green Paper was that "Elderly Could Have to Pay £20,000 For Care" (Times 15 July 2009).
This highlighted two of three of the proposed funding solutions which again are in summary:
• The Government pays up to a third of the cost of care - this to me does not on the face of it take us any further forward than the current system as you or your family would still have to find the rest.
• A Voluntary Insurance Scheme under which the state would pay the same proportion (estimated £20,000-£25,000 in today's terms). Insurance would be made easier to access.
• Compulsory Insurance of £17,000-£20,000 in today's terms and providing free care for all those who need it.
A key issue in the funding options is that they are considering deferring payment until death - that is to say, for example, the cost of care would be met during your lifetime, but then the Insurance levy applied to your estate on death. The idea here is that you would not be forced to sell your house etc during your lifetime.
This does however, raise many questions including about any survivors living in the house who may become homeless due to the need to sell the property to meet the levy.
Furthermore, experts have suggested that the Government's solutions only cover the costs of care and nursing, and not board and lodging which can account for between a half and two thirds of the cost of residential care. It is likely that any advance funding insurance, particularly a compulsory insurance (tax by the back door), would be hugely unpopular.
What is clear is that the Government is determined that the individual will be largely responsible for meeting the cost of their own care. I would suggest therefore that it is crucial that the cost of future care is covered in any comprehensive financial plan. The average costs included in the Green Paper give a good starting point.
To promote 'long-term investment'
Switching 'hard and expensive'
Smaller funds still packing a punch
To drive progress