Andrew Dilnot had a tough challenge in examining how the UK might solve its long-term care funding problem but his recent comments make me wonder whether he is aware of how apathetic people are.
Charged with coming up with a plan to save Britain from a long-term care funding crisis, he has suggested that people should be automatically sent information or signposted to advice about long-term care funding at certain trigger points in their life.
As this paper reported last week, Dilnot reckons that too many people do not think about long-term care until they reach a crisis point and so he is suggesting a prompt at retirement could be a helpful reminder.
Really? Does he honestly believe that people are going to open a letter landing on their doormat suggesting they read up on long-term care and act on it? Evidence suggests to the contrary – many people leave it far too late to get their financial house in order.
For example, much of the population have got little idea how much they might need to live off in retirement, let alone whether they have enough put aside to help pay towards care. It is why we have a ticking pension time bomb crisis and one which will go off before a long-term care timebomb explodes.
What’s more, the vast majority of people do not take out critical-illness insurance or income protection cover either. For many, it is an expensive gamble on whether they are going to be diagnosed with a terminal illness or fall off a ladder and break their neck. Indeed, you wonder how many people would baulk at buying car insurance if it was not compulsory.
There is a huge long-term care issue thanks to increasing longevity and we need to find ways of resolving them but a nudge here or there is not going to help much. And I am not sure that Dilnot’s hope that the financial industry will come forward with solutions to support his idea of “capped funding” will work either.
His idea is that if individuals have to pay no more than, say, £35,000, no matter how long their care lasts, this will allow insurance companies to design more affordable and simpler products to help consumers with their financial plans.
We have been here before, of course. Long-term care insurance was heavily promoted by the industry and the Government in the early 1990s as the means to pay for the predicted explosion in demand for long-term care.
But because of the difficulty in predicting demand, insurers charged prohibitively high premiums and the expected uptake never materialised. In 2002, the year when PPP, the biggest provider of pre-funded LTC policies, pulled out of the market, just 3,348 plans were sold.
Insurers are not charities and a product needs to be profitable for it to stand a chance. I agree that the cap should allow insurers to come up with more affordable products but there also needs to be demand for such cover to be a success. Yet actuaries reckon that only one in four people aged over 65 will need long-term care. Faced with a crippling mortgage, a family to provide for, a pension to save for and the general uncertainty of employment in the modern world, I suspect that the majority of people will look at those odds and take the chance that they will be among the lucky three in four.
Any proposal or solution to the long-term care funding dilemma that the Government decides on should counter that the public will not give a damn, however much they should.
Paul Farrow is personal finance editor at the Telegraph Media GroupMoney Marketing