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Long-term care reform edges closer to financial advice

As the Care Bill moves to the Commons, there is a growing acceptance that anyone entering assessment for long-term care should be guided towards full financial advice.

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Reform of the social care system has edged a little closer with the Care Bill now being considered by MPs after completing its passage through the House of Lords. So what progress has been made since the opening debate in May and where do we go from here?

Described as ‘the most significant reform of care and support legislation in 60 years’, the objective is to create a modern framework for care in England that is affordable given the rapidly ageing population and pressure on public finances.

Caring for the elderly is an expensive business and a key part of the reforms is laying out who should pick up the tab – the individual or the state.

The Government has accepted the Dilnot Commission’s recommendations for a cap on care costs and a universal deferred payment scheme. But the success of the reforms will depend on ensuring people fully understand their financial responsibilities and can plan for care costs in advance.

A positive element of the Bill’s passage through the Lords has been the sheer strength of feeling about the key role of regulated financial advice in the new regime. This led to a great deal of behind the scenes discussion with Government ministers taking on board the need for local authorities, who will become the ‘gatekeepers’ to social care, to be proactive in helping those facing potentially large care bills secure professional advice at the right time.

While not willing to include regulated financial advice in statute, at the Bill’s final reading in the Lords, Health Minister Earl Howe said councils should have a ‘facilitative’ role providing self-funders with a ‘nudge’ in the appropriate direction and that simply handing out leaflets or putting information on a web site is not sufficient.

He said local authorities should use the contact they have with self-funders as an opportunity to give them individually tailored advice that suits their personal circumstances. He said: “They are likely to know something about a person’s financial situation and so will be able to tell them about the range of information and advice that might be relevant to them in considering their care options, whether that is light-touch budget planning or advice from a regulated organisation.”

He added that work is underway, with stakeholders and the financial services industry, to finalise the guidance. Part of this will be learning from those local authorities who are already successfully directing people to regulated financial advice. Worries that councils could be held liable for bad advice have been dropped and there is a real recognition that local authorities have nothing to fear from regulated advisers and much to gain.

Not only would many ‘self-funders’ benefit but also the local authorities and care homes who are affected when people run out of money while in their care.

As MPs start their scrutiny of the Bill, the goal is to ensure that MPs take on board these strong feelings evident in the Lords so they are not overlooked or watered down. Our efforts will be to look closely at the exact wording of the regulations around information and advice and to push for them to be included in a statutory instrument rather than simply as guidance.

While the principles around care funding seem to have been generally accepted, there is still heated debate around the Universal Deferred Payment Scheme. The scheme aims to reduce the number of people forced to sell homes to pay for care, instead allowing them to take a loan which can be repaid after death when the home is no longer needed. One peer claimed the proposal has had its “balls cut off” by denying it to people who have assets of more than £23,250 on top of the value of the home.

The Government is between a rock and a hard place. It will be unpopular to deny help to the ‘squeezed middle’ by limiting access to deferred payments. It will be equally unpopular to allow access by those who have sufficient savings to pay their own way and who might appreciate the convenience of what might seem a cheap loan.

This should be an important test of how prepared the Government is to stick to its guns about exactly who should be expected to pick up their own care costs in later life and who the state might step in to help. There is an important principle at stake here. However, in May 2015, there is also an important general election.

Stephen Lowe is group external affairs and customer insight director at Just Retirement

The need to find extra funding for long-term care

The potential need for individuals to take financial advice is highlighted by the difference between people’s perception of the costs of funding long-term care and what it actually costs. Research from the Equity Release Council shows the average estimate for the cost of residential long-term care is £16,027. In fact the typical cost of residential care is 77 per cent higher at £28,367 a year.

With many people failing to make adequate financial provision for their retirement, let alone long-term care, advice can be crucial to ensure that people’s assets are used as efficiently as possible, with many people likely to fall back on the one asset of any size – their home.

Equity Release Council chairman Nigel Waterson says: ”The UK faces a mounting bill for care costs in later life as people live  longer, but despite people’s concerns there are a range of choices open to over-55s. When emotions are likely to be running high, it is vitally important that people receive expert advice from regulated professionals to properly assess their options and the impact of any decision.

“Regulated advice is invaluable not just for the peace of mind it brings, but because it enables fully informed decisions that lessen the chance of unexpected consequences. That is why The Council and its members ensure that anyone considering equity release receives both regulated advice and independent legal guidance in person while they assess the benefits of taking out a loan. It’s also why regulated advice should be a minimum requirement in the new Care Bill for anyone needing to fund long term care.

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