The government must urgently publish its green paper on social care as 90 per cent of over 65s have no plan for social care funding, the Association of British Insurers says.
The ABI argues a massive new campaign is needed to raise awareness of social care funding based on polling research from Populus alongside analysis it commissioned from the Pensions Policy Institute.
It shows 51 per cent of people see the state pension as the most likely source of funding to pay for care, with only 17 per cent saying insurance and 26 per cent saying they would sell their home.
An effective target group for incentives to help self-funders are those who have savings of more than the means test threshold of £23,250, but less than £200,000.
This target group makes up approximately 37 per cent of people in England aged over-50 and could benefit from incentivising ways of self-funding care.
The report also analyses five options for self-funding of social care, and sets out the challenges and opportunities of each.
- No income tax payable on pension income used to pay for care
- Tax-free pension withdrawals if used to purchase an insurance product that covers care costs
- Introducing a new care Isa with no inheritance tax paid on residual amounts at death
- Releasing equity from a property to purchase an insurance product that covers care costs
- Pledging equity from a property to cover care costs
ABI director of policy for long-term savings and protection Yvonne Braun says: “The social care system and how it is funded desperately needs an overhaul. People simply aren’t preparing to pay for their care costs and this needs to change. The government urgently needs to publish the promised green paper and take important decisions on the future of care funding.
“With only one in ten over-65s making provision to pay for care, the size of the financial time bomb is clear for everyone to see. A major public awareness campaign is essential if we are ever going to get more people making financial plans for care.”