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Use state pension model to fund social care, report urges

Pension-Pensioner-Elderly-Older-People-700x450.jpgPeople should contribute to their social care the way they save for the state pension, a former work and pensions secretary says.

In a paper published today by the Centre for Policy Studies, MP Damian Green argues there is an urgent need to tackle inadequate social care.

He points out there are currently 5.3 million over-75s and that number will double over the next 40 years as people will not just be living longer but will have more complex and expensive care needs.

In the report Green proposes adopting a “state pension model” by introducing a new universal care entitlement, which guarantees everyone a decent standard of care.

People could pay for more expensive care on top of the universal care entitlement by purchasing a care supplement.

The idea of a care supplement is something similar to an annuity or insurance policy – which ensures that money for more expensive care is available if needed.

The paper says the money could come either from people saving small amounts across their working life; through the payment of a lump sum upon retirement or from savings or existing pension pots.

Money could also come via equity withdrawal from people’s homes, which could potentially be realized through downsizing or a deferred payment when the property is sold.

Green says: “This would involve moving from the existing system – in which the state provides care via local authorities – to a nationally funded model, where the state pays this set amount for each week or month that an elderly person needs support.

“This would not end councils’ involvement in delivering social care, but would free them of a significant and increasing financial burden – as well as transform the incentives which currently prevent the construction of enough care homes and retirement housing.”

Reacting to the report, Aegon pensions director Steven Cameron says: “With an increasing number of us facing the prospect of needing social care in later life, the government needs to put in place a stable and sustainable way of sharing costs between the state and individuals, based on their wealth.

“While this has proven particularly politically sensitive, we urgently need an open debate around how to pay for this, including the potential for increased taxes, earmarked for social care. Ideally, a new deal would gain cross-party support.”

The government has repeatedly promised a green paper on social care but failed to deliver one.

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  1. The fact that the government has repeatedly promised a green paper on social care but has failed to deliver one strongly suggests that it doesn’t actually have a practical and workable policy on the subject. Surely the best push to encourage people to take responsibility for the costs of social care would the allowance of tax relief on the premiums to LTC insurance policies. Much of this would be recouped by savings for local government authorities and extra taxes gathered from the providers of such policies and from the people employed to administer them.

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