The think tank Policy Exchange has called for financial advice to be a key element of Government plans for reform of funding for long-term care.
In a new paper, “Careless – Funding long-term care for the elderly”, Policy Exchange also warns the Conservative’s pre-election proposal for an £8,000 voluntary levy to fund future long-term care would be inadequate and that the premium would need to be £40,000 in order to cover costs.
Policy Exchange says that many of the baby boom generation will enter old age with greater wealth than any group before them, but run out of money and end up falling back on the state.
The think tank says that financial advice is crucial to helping self-funders ensure they are able to provide for themselves throughout old age.
Partnership has previously campaigned for local authorities to help people access financial advice as a factor that could help address the long-term care funding gap.
Policy Exchange also suggests that if a voluntary premium were introduced, which is one of the ideas under consideration by the Government’s new commission on long-term care, it would need to be closer to £40,000, rather than the £8,000 figure the Conservatives suggested before the election.
The paper suggest that a hybrid model should be explored whereby the state guarantees some level of care but people are required to top this up up through insurance or annuity backed products.
Partnership managing director Chris Horlick says: “Partnership has campaigned actively for local authorities to sign-post people who have to pay for their own care to appropriately qualified financial advisers, and we are delighted Policy Exchange identify this as one of their three key recommendations.”
Partnership says that last year 130,000 people entered residential care in England. From this number 41 per cent, or 53,000 people had assets – including property – in excess of £23,250 which meant that they had to fund their own care costs. However out of this number only 7,000 received appropriate financial advice.
Horlick says: “It is accordingly no surprise that Partnership estimates that the cost to local authorities of self funders prematurely depleting their capital is nearly £1bn each year, in England alone.”
Horlick also supports the hybrid funding model and welcomes Policy Exchange’s call for greater clarity from the Government about what costs the state will meet and those that the individual will have to meet.
He adds: “We believe that greater certainty will play an important role in helping individuals prepare properly for their meeting their care funding needs.”