Former care services minister Paul Burstow says the Government has to do more to promote regulated financial advice in long-term care reforms.
In a wide ranging interview with Money Marketing, Burstow says the Care Bill risks the “spectre of a misselling scandal” unless regulated advice is given a more prominent role.
Burstow, the Liberal Democrat MP for Sutton and Cheam, is also concerned about the timing of the Bill’s implementation, saying there needs to be a six-month transition period to cope with the demand of people signing up. Labour health spokesman Lord Philip Hunt has previously said the system “faces collapse” under the weight of demand.
The Care Bill, which is being debated in House of Commons, is introducing a £72,000 lifetime cap on care costs from April 2016 with the aim of stopping older people selling their homes to pay for care.
Burstow was the key MP behind the reforms as he introduced the draft Bill as minister. When he was replaced by fellow LibDem MP Norman Lamb in September 2012, he found himself in the unusual position of chairing the joint scrutiny committee and proposing amendments to the same Bill he introduced.
The Bill forces local authorities to signpost to independent advice but not necessarily regulated advice. Cross-party peers have pushed for a stronger role in local authorities referring to regulated advisers during debates in the Lords.
Burstow says: “The role of regulated financial advice still needs to be pursued. A passive list of regulated advisers is not sufficient, it has to be a proper hand-off.
“Local authorities at the moment only have to signpost to adviser, there is nothing that actually requires them to make a solid adviser recommendation, and that is the bit that needs to be nailed down.
“There may need to be an intermediary who brokers the access to advice. It is one of the issues which I hope to get some further clarification on.”
An Apfa poll, published earlier this month, showed 58 per cent of advisers would offer long-term care advice if there were referrals from councils, compared to just 35 per cent now.
The Department of Health estimates only 40 per cent of self-funders use regulated financial products. There is concern funders could end up paying for an adviser when they do not need regulated products.
Burstow says if councils refer all self-funders to regulated advisers there must be an offer of an initial free consultation first.
He has major concerns over the role of advice in the deferred payments scheme. The local authority deferred payments scheme allows long-term care funders to use equity in their home to pay for care costs and repay it by selling their home when they die.
Without mandatory regulated advice Burstow believes the Government is open to legal challenge because of the scheme’s similarity to equity release. He says the current model risks the “spectre of a misselling scandal” on the scale of the pensions misselling scandal relating to contracted-out Serps in the 1990s.
Burstow defended the use of a deferred payments scheme means-test which is only open to people with non-property assets of less than £23,250.
Labour peer Lord David Lipsey said the means test “cuts the balls off” the Bill as care funders will sell their homes rather than run down assets.
But Burstow says: “Why would someone with that level of resource choose to use a deferred payment scheme when they will have available to them other financial products that would be more cost-effective? Deferred payments are aimed at middle England, who are not super-wealthy but have the benefit of a property asset without wealth in depth.”