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It’s a fair cap

The Dilnot report offers an opportunity that must be seized

If the main recommendation of the Dilnot commission report on funding long-term care is accepted by Government it will lead to a whole new range of affordable long-term care insurance products.

Dilnot has recommended a public/private partnership in which people who need care will fund the first £35,000 of care themselves, with the state picking up the rest of the long-term care costs.

Long-term care insurance products were first developed and sold in the UK during the 1990s but they were expensive as they were designed to cover all of the care costs from the point that care was needed, an open-ended liability. Consequently, only the wealthy or reasonably well-off could afford them.

As well as the cost of longterm care insurance in the 1990s, there was an added issue in the minds of the public of uncertainty in Government thinking on longterm care.

By capping the amount that an individual is liable to pay to £35,000, insurance products can be developed and sold to cover the capped amount. Consequently, the cost of the insurance will be much less than the products sold in the 1990s, somewhere between one-third and onequarter of the cost.

This would make long-term care insurance affordable to many more people and would really open up a potentially big market. The knock-on effect of this would be that the bigger life and health insurers would be likely to develop products rather than a few small niche players as in the 1990s.

If, in addition to the main recommendation outlined above, the Government were also to make a change in pension legislation to allow a pension annuity to increase at the time of needing longterm care, then it would be possible to use pension arrangements as a method of funding the £35,000 of costs.
I have always seen pensions as a natural and logical home for long-term care funding.

If the Government does decide to implement the Dilnot recommendations, then the uncertainty that has existed in the past will be removed, which means that many more people will be likely to consider using insurance to fund their long-term care costs.

As well as the main recommendation, the commission has made a number of further recommendations that will all serve to clarify and improve the provision and funding of long-term care but it is the main recommendation of a cap on costs which is crucial to all of those who may need care in the future and it is imperative that the Government seriously consider this approach.

To fail to take this opportunity to provide a fairer system for all will be a failure by the Government to tackle what is a worrying and financially destructive issue for a growing number of people.

Peter Gatenby is senior actuary at Mazars and was an adviser to the last Labour Government on long-term care


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