The Care Bill’s details emerge
The future structure of long-term care has been outlined in the now-published Care Bill.
The Care Bill (applicable to England only) was one of 20 Bills announced in the Queen’s Speech back in May. The Bill is the next step after the Dilnot Report, which was released in July 2011 and then mostly disappeared until mid-February 2013 when a policy statement was put out by the Department of Health (DoH). The proposed start date for the new care funding system was initially set for April 2017, but the March Budget changed it to April 2016.
The Bill caps the ‘eligible care costs’ that an individual is required to pay. The cap itself, like much of the other detail, is to be set in regulations, although the DoH factsheets cite £72,000. This figure will be index-linked, but so too will be payments made and this means that the process will operate in a like fashion to the residual percentage approach applied to the pension lifetime allowance.
‘Eligible care costs’ is defined as what the cost would be to the relevant local authority of meeting the person’s needs. This could be notably less than the fees paid for several reasons:
- The local authority cost will be for basic accommodation only;
- Care home charges to councils are often lower than those levied on ‘self-pay’ residents − even on a like-for-like basis; and
- Care needs only are covered, not ‘daily living costs’. The DoH factsheets say “People will be expected to pay around £12,000 a year towards their care costs if they can afford it.”
Only those with assets exceeding ‘around £118,000’ will be entirely answerable for their care costs until the cap is reached. For those with assets between ‘around £17,000’ and £118,000, a personal contribution to care will be necessary, but how this will be calculated is also left to the regulations.
The bottom line is that the net present value cost of this reform is just £2.4 billion.
2012: vintage year for the group risk market
The group risk market enjoyed a very strong 2012, according to the ‘Group Watch 2013’ report from reinsurer Swiss Re. Two record setting figures show premium income was up overall to £1.68 billion (a 9.7% rise), and the total number of lives covered up to 10.7 million. In product sectors:
- The group life (death benefits market) grew by 10.3% − at £1.055 billion it now exceeds £1 billion for the first time − while the number of lives covered rose by 185,000 to reach 8.4 million.
- Group income protection insurance premiums grew by £45.2 million to £563 million, with lives covered up 127,000 to 1,963,000.
- The smaller and more recent group critical illness market also grew. Premium income was up to £59.8 million (£55 million), and lives up from 325,000 to 339,000.
Swiss Re’s CEO Russell Higginbotham, said, “Growth of around 10% is extraordinary considering that the group market was in decline only two years ago. This shows that the market is getting
it right in the face of tough economic conditions and legislative changes.”
One factor accounting for the change is auto-enrolment which, while ostensibly involving only pensions, has led many employers to review benefits packages overall. The report also points to changes to the annual and lifetime allowances next year which could also see interest in non-pension linked death benefits increase. “A combination of this change and auto-enrolment makes a powerful case for high quality advice to create the most appropriate benefit package across the workforce. This will include flexible and voluntary cover facilitated by the employer,” the report concludes.
The group risk market looks set for continued growth coupled with long-term growth in the number of businesses being created in the UK. So too does the business protection market
− a number of insurers have recently improved their support and marketing packages for advisers in this area, which should further stimulate interest.