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Should we means-test pensioner perks to pay for LTC reform?

Nick Boles MP Conservative

A senior Conservative MP will today call for pensioner benefits to be means-tested and for the £2bn saving to be used to fund the introduction of Andrew Dilnot’s LTC proposals.

Nick Boles, who is close to prime Minister David Cameron and Chancellor George Osborne, is expected to say is a speech to the Resolution Foundation today that means-testing should be brought in for benefits such as free TV licences, bus passes and winter fuel allowance if the Conservatives are re-elected in 2015.

According to the Financial Times, he will say: “If we are to achieve stability in our public finances and make crucial investments in improving productivity and competitiveness, we must find a way to save at lease £8.5bn from the £145bn we currently spend on benefits other than pensions.

“If we are going to protect spending on pensions, as we should, equity between the generations requires that these cuts cannot only fall on adults of working age. We need to acknowledge now that we will not be able to continue the protection of these other benefits for better-off pensioners after 2015.”

The Dilnot commission’s report, published last July, calls for a cap on individuals’ lifetime contributions to social care costs of between £25,000 and £50,000, with £35,000 the recommended figure. It also calls for the means-tested threshold, where people must fund the full cost themselves, to rise from £23,250 to £100,000. Dilnot said his reforms would cost £1.7bn.

Last month, the Institute for Fiscal Studies said Dilnot’s proposals represent a “coherent way forward” and that they could be paid for by pruning benefits for wealthy pensioners.

The Government will publish a white paper on social care tomorrow and though it is expected to acknowledge the need for a cap, it is not expected to offer a solution to how this will be funded. Some, including the Nuffield Trust are suggesting the cost should be transferred to the NHS budget though this could prove difficult for the Government which has ringfenced NHS spending.

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. By the time you set up the administration to means test there will be no saving and this will just cause ill-feeling amongst those that have already paid most in to the system in tax and national insurance.
    A thoroughly bad idea.

  2. So those who have saved up for their retirement subsidise those who chose not do do anything during their working life. Like pension credit, fundamentally wrong.

  3. Means testing will cost more to administer than what it would save. This is apart from the poor messages that would be sent to individuals who have actually made some provision for their old age. Another way is needed and I don’t pretend to have any easy answer.

  4. and Bod Diamond was worth £20 million?????????

  5. most of todays pensioners have worked since leaving school, most in physical occupations unlike yourself,and would not require any bus passes etc. if one mrs. thatcher had not taken away the index linked pension and most of these were poor when young during the war, but dont worry you wont be in government to implement your proposals

  6. Totally wrong. My parents(not on a high income) saved and purchased their own home giving up lots of things in the process and therefore deserved whay they got. Conversely an aunt and uncle of mine earnt more than my parents, lived in a council house, drank like a fish, smoked 40 a day then when they retired with all the benefits they received they were better off than my parents. What the majority of pensioners get now are what they are entitled to bearing in mind they have paid into the system probably for 40 years plus. The problem with these ideas is they come from [people who have not yet worked all their lives yet or are well paid anyway and in a good pension scheme where the heating allowance would make no difference to them when they retire(unless of course they done what my relatives did)

  7. If anyone who works in this field takes the time to read the full Dilnott report they will see (in Volume 2) that the figures massively underestimate the LTC costs that we see in the real world. The report assumes £28,500 pa is the average total fee for a nursing home, with £18,500 being the care component that the state will pay.

    As for regional variation, they acknowledge it and suggest in Surrey you might pay on average £34,000 pa at the high end (!). Their idea is the portion paid for by the patient – the general living costs – should be a fixed amount across the country – at £7,000 to £10,000. So someone in a luxury home in Surrey (actual typical fees currently starting at £52k pa) would pay the same for their general living costs as someone in a more basic home in, for example, Luton (normal homes here can cost £26k pa).

    Dementia is now the most common reason I see clients going into homes. They are getting younger and their health is otherwise good. The fees for a dementia specialist home average 45k pa now, and will of course rise with inflation. I don’t think the Dilnott model reflects this change.

    It is interesting that Dinott proposes an essentially non-progressive approach to LTC funding – the richest pay no more into the pot than virtually anyone who ones their own home – and therefore has assets over £100k. This results in larger inheritances for families – but rising life expectancy means that the average age of receiving an inheritance is rising too – many won’t get it until they are at an age when they need care …. and so it goes on….

    Having said all that, it is a starting point. HIgher thresholds and staggered percentages – like IHT used to be – might be the answer.

  8. The whole long term care concept is interesting and the concept of passing it to the NHS makes sense. Currently if you get ill when your pre retirement / younger then we all share the costs via the NHS and some take out more than others but that is the system. Then when you get post retirement and have care needs as your heath deteriorates the poor get it free and the better off pay.

  9. In the end, those who can standon their own two financial feet must be encouraged to do so. The tax payer will have to help those who can’t. The hard part is what to do with and for those who can, but don’t.

    Bus passes and winter fuel payments are daft political gestures. The state pension is taxable, and should be increased to compensate for the loss of these silly benefits.

    The only losers would be people who can afford to lose a bit.

    As for long term care, the brute truth remains that the price is going to be paid out of general taxation. But first, the principle shoulde be set out: if you have assets and you need care, the assets have to be used up before the state intervenes. And if you have disposed of assets to avoid this fate, there should be a power to claw them back from whoever got them.

    There is no nifty way round this that doesn’t cost the taxpayer, and as a nation we are as good as broke. Boles is trying to spell out reality. Good for him.

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