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‘Nest-style’ equity release body could fund LTC, says thinktank

House UK Property 480

The Government may be forced to set up a “Nest-style” not-for profit public scheme to provide equity release to those with social care funding costs, according to thinktank the Strategic Society Centre.

In its progress report, published in July, the Government committed to a universal system of deferred payments for residential care.

It would compel local authorities to allow care costs to be deferred until after someone dies when the money can be taken from their property. The aim is to prevent people being forced to sell their home in a crisis to pay for care.

Strategic Society Centre director James Lloyd says: “It is difficult to imagine every local authority setting up a different scheme, so the Government may decide that the equivalent of a student loan company is required.

“Or, it may be that directing individuals to equity release providers will be enough for councils to fulfil the new duty. Alternatively, we may end up in a Nest-style situation in which a state-backed scheme ensures provision to those not profitable for the private sector.”

Lloyd says there are only 120,000 self-funders in residential care and many do not mind selling their home so the take-up of any scheme would be small.

Equity Release Council director-general Andrea Rozario says there is no detail on deferred payments yet and it is long way from implementation.

She says: “Local authorities will be charging an interest rate but we do not know what it will be. The Government sees it as a short-term solution but the details still need to be looked into. The industry may be able to help and we will be offering up the expertise in the industry and it could lead to support from the equity release industry.

“Equity release has a much wider scope that the deferred payments scheme so in reality it will not have much of an impact on the market.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. The private sector arguably caters reasonably well for those single people self-funding, whom have vacated their own home to move into residential care. They have the option of the Deferred Payments Scheme and private companies such as Bridgefast and Partnership offer capital-raising against the empty home while it is marketed for sale. So equity can be released in one of these ways.
    In the situation of a couple where one party enters residential care, the remaining occupying partner may raise equity release from any provider in the market, so no problems in that respect. The more pressing issue to my mind is that invariably the deeds are held jointly and the vacating person has perhaps moved into care due to failing mental or physical health, yet very often they have not arranged a power of attorney whilst capable of doing so.
    This lack of access to good advice more than anything is what Government should be concerning itself with. Half the solution is there. Just a bit of direction will complete the job.
    Simon Chalk
    Equity Release Planner
    Member of the Equity Release Council

  2. NEST has yet to be proven to be a success or failure and it is being touted as the cure for all ills?

  3. Many Local Authorities already operate the Deferred Payments Scheme which to date has been interest free so the new proposals to apply interest are a backward step. As Simon says, good advice is crucial but so is better, non scaremongering information and education, especially about the issues of home ownership, Lasting Powers of Attorney etc – that is where the government and all of us can add real value.
    Romy Melville
    Chartered Financial Planner
    Member of Society of Later Life Advisers (SOLLA)

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