Social Care
The insurance and long-term savings industry has an important role to play in helping self-funders meet care costs both now and in the future.
The Government committed to publishing a social care green paper in 2017, which was then severely delayed. In June 2019 we published new research to keep the momentum going, and to inform the funding debate with new evidence.
Read more about the current role of the industry, and our priorities for the green paper, which includes findings from our new research.
Current role of the industry
Insurers and long-term savings providers offer several insurance and long-term savings products to help fund care.
- Pensions: particularly following the pension freedoms in 2014, many individuals look to their long-term savings to fund social care needs. Our consumer polling found that 38% of individuals would expect use to private and workplace savings to pay for care.
- Equity release: Some insurers provide equity release products, allowing individuals to release some funds tied up in their home to provide either a lump sum, a regular income or both, to meet care costs, especially care at home.
- Immediate needs annuity: some insurers offer a product called an Immediate Needs Annuity, which pays out a guaranteed income for life to help cover the cost of a customer’s care fees in exchange for a one-off lump sum payment.
- Life insurance triggering on death or care needs: Some life insurance productsprovide customers with lifelong care cover that pays out on death, or crucially, if they suffer an illness which leaves them permanently incapable of looking after themselves.
Our green paper priorities
When considering funding reform, the ABI has 6 main priorities that the government should take into account:
- Raise awareness levels: once crucial decisions have been taken on the future funding system of social care, it is imperative that any new system raises the public’s awareness of their liability to pay for care, as well as the costs involved. When we asked consumers what percentage of people would have to pay entirely for their own social care costs in later life, answers ranged from 0-100%.
- Help individuals plan: There are not currently many individuals making plans to meet care costs in later life. Funding is not a top priority for people to protect against during working life, meaning they do not budget or plan for the risk, nor do they access advice and guidance about planning for later life. ABI polling found that 89% of individuals have no plans to meet care costs.
- Consider the role of incentives: If following reform, some individuals are required to self-fund, then effective mechanisms should be in place to incentivise these people to plan ahead.
- Research from the Pensions Policy Institute has found that 37% of people could benefit from targeted government incentives. These individuals have savings of more than the means test threshold, however less than £200,000.
- For example,if the government were to grant tax relief on payments from a pension to a care provider, it could give individuals a significant increase in purchasing power.
- Keep it simple and clear: Any new settlement needs to be easy to communicate to the public, and there needs to be a clear delineation between State, local authority and individual responsibility.
- The existing state system of benefit provision is very complicated and should be simplified to enable consumer understanding of which non-means-tested benefits are available to them. ABI polling has found that the public underestimate the level of support the state offers through the State Pension and Attendance Allowance.
- Plan for the long-term: Individuals need to be able to plan for the long term and have confidence that the system in place is robust and will remain largely unchanged for a reasonable amount of time.
- Be realistic: There needs to be clarity that the care funding solutions for those who can afford care will be, for now, a range of products that can be used individually or in combination, rather than a single, voluntary and comprehensive, “silver bullet” product.