On 14 May the Care Bill was given Royal Assent. It was a Bill that had been hotly debated – quite rightly, given the importance of the issues. However, I suspect that was only the start of the debates.
Whatever your views of its merits or deficiencies, it was a desperately needed piece of legislation and does at least set out to provide a coherent policy of sustainable quality care and support for an ageing population, the majority of whom will not be able to rely on state support alone.
The Care Act provides the framework, and while there will be substantial delivery of Government education around its aspirations, these will only be achieved through full and active public and private co-operation.
The Care Act
While a full analysis of the Care Act is outside the scope of this article, some aspects are worthy of comment.
The new scheme to allow deferred payments looks to be an improvement on the present arrangement. It should allow anyone needing residential care, who has less than the means-test limit and whose home is not occupied by a partner or dependent relative to use the value of their home to pay for care without the need to sell.
What we don’t know are the relevant fees, the interest rate, or whether there will be a negative equity guarantee.
There will be new national minimum eligibility criteria that, again, should be an improvement on the present criteria, which can vary by local authority. However, we expect this to be set at ‘substantial need’ and not only has this yet to be clarified but, perhaps more importantly people need to understand the implications.
Then we have the cap on social care costs. A fine idea, just impossible to deliver on almost any financial level. A recipient of care will face up to three types of cost – daily living costs, local authority-set costs and top-up care costs. The £72,000 cap on 2016 prices applies to only one of these – authority-set care costs. Individuals will pay all costs before the cap is reached (subject to means testing and any benefits payable) and will pay both daily living and top-up care costs once they have reached the cap.
Most of the people entering care will not reach the cap. An Institute and Faculty of Actuaries report estimated that for people aged 85 (the typical age when going into care), there is an 8 per cent chance for men and less than a 15 per cent chance for women that they will reach the cap.
So what now?
Before the Care Bill received Royal Assent, the Government began consultations with the financial service industry, seeking input but keen to see financial products developed to enable people to provide for their care needs. While a memorandum of understanding was signed, and various life companies and the ABI were signatories, actions speak louder than words.
There remains a remarkable lack of appetite among providers to act, even though there is at least one reinsurance company keen to engage. Whether this reluctance is down to a lack of understanding of the care market or apprehension of being the first to enter it (my money is on both), only they know.
There is, of course, one more essential element and that is advisers themselves. Clause 4 of the Care Act makes it clear that independent financial advice (that is, independent from local authorities) should be given by people who are appropriately trained. This has to equate to members of the Society of Later Life Advisers, the membership of which is happily increasing daily.
So the Government has done its bit and advisers are trained and ready. What we need now are the financial products, but, sadly, I am not holding my breath.
Tony Mudd is divisional director of development & technical consultancy at St James’s Place