No real planning for demographic realities of long-term care

No real planning for demographic realities of long-term careThe Guardian reported last weekend on a leaked government memo disclosing no real planning for demographic realities of long-term care.

The memo was written by former Pensions Minister Baroness Altmann and was reported to have exposed a failure by government to address a demographic change as it relates to care fees planning.

Writing the memo to No 10 Downing Street and Oliver Letwin, then a cabinet minister, Altmann said:

“I’m afraid this really is a looming crisis which has been left far too long already,

“This really is an issue that has the potential to cause significant social and economic distress.

“There has been no real planning for these demographic realities. No money has been set aside in the public or private sector to fund social care if or when the needs arise.”

Altmann goes on to warn of the huge political risks of allowing the care crisis to unfold.

“There is no money set aside for social care spending by individuals or by local authorities – needs have to be funded as they arise, and if the money is not there the quality and availability of care is compromised, causing scandals and misery that could potentially rebound on policymakers at some point,”

There is also acknowledgement in the memo that the care reforms prompted by Andrew Dilnot in his policy review and a suggestion that encouraging people to save for their own care costs could be the only viable solution.

One of the recommendations made by the Dilnot Commission, and later incorporated in the Care Act, was the introduction of a lifetime cap on care fees.

The introduction of this cap was delayed until the start of the next parliament in 2020, leading many to believe it has simply been kicked into the long grass and is unlikely to be implemented.

“It seems clear that we cannot rely on insurance companies to devise policies that will cover the costs of care for many of the population,

“I think an alternative approach is probably required to help more people prepare for care costs over the coming years. We should consider a savings solution.

“We need to encourage people who are already in later life to earmark some of their savings to pay for care, should the need arise.

“We have been successful in getting people to save in pensions by using tax incentives and I would suggest we need to incentivise care saving too.”

That savings solution could look like an Individual Savings Account (ISA) specifically designated for care costs, or the ability to take tax-free withdrawals from pension pots to pay for social care costs.

With no real planning by government for the demographic realities of long-term care, it seems likely that the status quo of individuals having to make their own provision for care costs in later life will continue.

 

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About Martin Bamford

Martin Bamford is a Chartered Financial Planner, Certified Financial Planner (CFP) professional and published personal finance author. He works with elderly clients to provide advice on funding residential care fees, hosts the Informed Choice Podcast and is a keen ultra runner.
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