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.”