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Government white paper on LTC is missing the point

Government plans to fund long-term care overlook the vital issue of funding and fail to notice a readymade solution staring us in the face.

The Government’s long-awaited white paper on social care has finally been published but it is fair to say it has been greeted by a somewhat lukewarm reception from the financial services industry and, in particular, the equity release community.

While it has acknowledged the methodology behind Andrew Dilnot’s care cap proposals, it has postponed any concrete discussions concerning long-term care funding until the next spending review.

Instead, the report has tendered plans whereby a universal deferred payment scheme would be implemented so pensioners would not have to sell their homes in order to pay for their care needs. This would see local councils lend money to individuals to cover their care costs which would then be recouped on the sale of properties after they die. A scheme has also been mooted that would see the elderly opt to pay premiums to ensure their accommodation and care costs would be capped.

While these suggestions show the Government is finally waking up to the importance of addressing the long-term care issue, there is an inescapable feeling that the white paper has swerved the most pressing matter of all – where the money is going to come from.

The Equity Release Council was among the first to react to the paper’s publication, with director general Andrea Rozario criticising the lack of detail around the implementation costs of the suggested schemes. She has also questioned what sort of interest rates councils will need to charge to maintain the arrangements and accused the Government of doing stakeholders a disservice by delaying the announcement of any funding clarification.

I would be inclined to take a similar standpoint as while the proposals hint that the Government is moving in the right direction, there is not much substance to the white paper without addressing the elephant in the room that is the funding question.

From where I am sitting, it also seems the suggestion of a deferred payment scheme where individuals are loaned money to cover care costs that is then recouped from their property when they die seems suspiciously similar to equity release.

Rather than burden local councils with the additional responsibility of implementing and maintaining the costs of such schemes, why not encourage older homeowners to access some of the equity they have built up in their properties via the providers already active in the marketplace?

It seems ridiculous to be dreaming up convoluted new proposals for councils to implement and get their heads round when there is a ready-made solution staring everyone in the face.

There are certainly signs that the Government – and the wider public – are belatedly realising how valuable equity release can be in helping meet long-term care requirements but it seems to have been overlooked in this instance.

Similarly, it is encouraging that the Government intends to develop a new information and advice strategy to help people when care needs arise and that it plans to establish a working group incorporating politicians as well as professionals from financial services, local authorities and the care sector.

However, it is also to be hoped that any such proposals make use of the existing framework in place, including the vast range of expertise available from the Equity Release Council as well as the sterling work already undertaken by organisations such as Age UK and the Consumer Credit Counselling Service.

All in all, it is heartening to see progress being made and long-term care proposals moving in the right direction but the financial services industry will need to see a little more detail before it gives anything other than a cautious welcome to this white paper.

Chris Prior is business development manager at Bridgewater Equity Release

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