The Scottish Executive's plan to offer free personal care to all
pensioners has added heat to the debate over long-term care but its effect
on IFAs is double-edged.
Although the public discussion has raised both IFA and public awareness of
protecting assets against the high cost of LTC, the confusion makes selling
LTC products harder for IFAs.
The committee appointed by the Scottish Executive to deal with the issues
of what personal care will mean and how it will be administered is
wrestling with how to create a system that will not break the bank and add
to the amount of care given.
The Government this month introduced changes to the rules on payment for
LTC affecting the rest of the UK, which saw the upper means-testing limit
for capital increase from £16,000 to £18,500, beyond which
pensioners will not get any state help with LTC.
For pensioners with assets of between £11,500 and £18,500, the
first three months spent as a “permanent resident” in a care home will not
be included when assessing their ability to pay for care.
The complexity of the Scottish Executive's proposals means companies have
been cautious with their LTC product designs. What the Scottish people may
be expecting guaranteed personal care to consist of would cost a
considerable sum on the private market.
The Scottish Executive's committee will be faced with costing what is
potentially an open-ended financial commitment. Carers who are looking
after relatives and friends for no money could withdraw that support if
they believe the state will provide the same support.
With an ever-ageing population leading to more people living alone, the
costs of a comprehensive state plan will get far bigger when projected
Westminster has responded to the royal commission's recommendations on LTC
by saying it would prefer to spend some of the estimated £1bn cost of
providing personal care in getting people out of beds and home, which also
relieves pressure on NHS beds.
The commitment South of the border is to offer nursing care but what that
will amount to is still being discussed, with a decision due in October.
Some believe that if a level of state care provision is introduced in
Scotland beyond that provided in the rest of the UK, then Westminster will
be shamed into extending provision nationwide. But Tony Blair has made it
clear in Parliament that he thinks the money could be better spent
Scotland has already distinguished itself from the rest of the UK by
paying for Scottish students' fees – a commitment that is a lot easier to
quantify – but the rest of the UK has not followed suit.
If a clearly different arrangement is put in place in Scotland, Opposition
parties and pressure groups in the UK will doubtless castigate the
Government for not doing enough for pensioners.
Zurich IFA protection marketing manager Paul Heaphy says: “It is a nice
political commitment to make. To say you will look after OAPs is great. The
borders will become the Bournemouth of the future.”
IFA Care president Graham Fidoe says his members feel it is a political
issue in Scotland and think the plans may not come to pass. He says: “It
may be next year before a decision is made. We need clarification more than
anything. The general public is still uncertain but we are seeing more
advisers going into the long-term care market.”
Age Concern Financial Partnerships technical manager Chris Ellicott
believes the discussions have really raised the issue in the minds of the
public. He says: “We are getting a lot more people enquiring about what it
could mean to them. Long-term care is definitely moving up the awareness
The free nursing care that will be introduced across the UK in October is
up to a limit of £5,000 a year. With the average cost of a nursing
home in the UK at £19,604 a year, LTC products are aimed at people who
have assets to protect.
PPP Life Care marketing manager Paul Bennett thinks that because of the
various debates and the royal commission, IFAs have put off thinking about
LTC until the Government sorts it out. He says: “But now more IFAs are
recognising it is an important area of financial planning.”
The Consumers' Association welcomes Scotland's decision to offer more care
but sees the need for high-quality advice as essential.
Principal researcher Teresa Fritz says: “The whole area is fraught with
complications and emotion. The consumer is in a poor posi tion and does not
know where to go for advice.
There are good policies and good advice but advice is in short supply.
Until who is going to pay for what has been sorted out, people do not know
what they have to fund.”
The Consumers' Associ ation is critical of the Treasury's proposals to
introduce Cat standards for LTC insurance products. This echoes the views
of the Financial Services Consumer Panel, which felt the standards are set
too low and are too open to differ ent interpretations.
Fritz says: “We normally welcome industry standards but because this
market is so specialised, some of the best products are not Catmarked. The
market is small at the moment but products could flood it. Long-term care
products are not off-thepeg products. It is a confusing maze to get through
and getting specialist advice is important.”