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You need to take responsibility for your long-term care

The state is keen for people to take responsiblity for their pensions, but there's another problem and it's just as pressing: long-term care.

You need to take responsibility for your long-term care

This year was supposed to mark progress in the financial health of the UK population, as the government enforces its new pension-saving regime. However, the government cannot escape the problem of long-term care, which has again reared its head.

Last year the Dilnot Commission, headed by Andrew Dilnot, proposed long-term care reforms that would cost £2 billion to implement. These included a £35,000 cap on long-term care costs – after which the government would pick up the bill – and an increase in the threshold for means-tested support from £23,250 to £100,000.

The report was initially welcomed by the government, which promised to consider the issue very seriously, and even committed to providing the £2 billion needed every year by 2014/15.

Then all went quiet, and it’s fair to say the Dilnot report was kicked into the long grass.

The reason? UK Plc just doesn’t have £2 billion a year to fund long-term care. The recommendations of the report are laudable, but you're asking overstretched taxpayers to put their hands in their pockets once again to fund the care of older generations. As life expectancy increases, the bill for long-term care will become an increasing burden on the state.

The long-term care issue has been dragged back into the spotlight this week with the publication of a report from the Health Committee backing Dilnot's plans.

So what’s the solution to this difficult problem? The government is already trying to relieve some of the pension burden by introducing semi-compulsory auto-enrolment into pension schemes, and it wouldn’t be a surprise if we followed Australia into full compulsion in the future.

But making people save for long-term care is trickier. One solution Dilnot put forward was an insurance product that covers the cost of care homes and at-home care should you need it.

On the face of it this seems like a sensible solution, although admittedly difficult to enforce, and it would require the financial services industry to create products that were not prohibitively expensive.

For many, insurance for long-term care would be just another thing to fork out for – no one likes to pay out for insurance – but if it meant living in a better care home, or being able to afford care in your own home, would you do it?

The state can only provide for so long. It’s time people started looking after their own financial futures.

10 comments so far. Why not have your say?

paris watcher

Feb 08, 2012 at 12:48

What happens to the low earners who can only just look after their immediate needs? This is a scandal about to break.

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Anonymous 1 needed this 'off the record'

Feb 08, 2012 at 12:59

It is quite simple. A lot of the "older generations" have been very clever and have accumulated wealth through their efforts in property. In this, they have the means to pay for their longterm care if needed.

I don't think the young overstretched taxpayers should be paying care home costs for all - thus enabling those lucky few (or majority? given homeownership rates) to have property inheritances.

Or they can pay for all, and the overstretched taxpayers just ends up leaving the country – since they can’t afford their rent, tax, student loan debt, or even think about buying a house to live in, and starting a family.

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Alan Tonks

Feb 08, 2012 at 13:31

If we didn’t have to pay for all and sundry in this country, then maybe we would have enough for the indigenous population.

I am sure I am not being PC enough for some, but there you are.

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Feb 08, 2012 at 15:31

I would like to be responsible for my long term care but nothing suggested by government reports so far gives me any hope of doing so. First it was a one-off payment into an insurance scheme on retirement – great idea that, just when your salary drops by half you have to fork out several grand. Next idea was Dilnot’s £35K cap but that excluded accommodation costs so still impossible to plan for, and now we are being softened up for £60K + accommodation. By the time this passes into legislation it will probably be £100k, a long way past my ability to fund it.

Government would do better to address the dreadful profiteering in the care home industry, drive costs down and improve service. I was recently involved with finding a place for an elderly relative in Birmingham and was shocked at the Spivs and bullies I met. Builders are setting up care homes because it’s more profitable than building, not because they are driven by a desire to provide a service. The NHS and Social services are rude and aggressive to families dealing with unfamiliar procedures.

I can’t say I’m exactly looking forward to my old age. Will 84 units a week with a guaranteed shorter lifespan be a better way to spend my money?

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Feb 08, 2012 at 15:50

@Alan Tonks - presumably by 'all the sundry' you're making a coded reference to immigrants?

Does this include the third generation immigrants whose relatives fought on our side during WW2, and then came over in the post war years to staff the welfare state?

Do you mean the Russians and Americans coming into London in large numbers, buying up our expensive property but who seem to be loathe to pay our taxes - both income and local?

And what do you mean by indigenious? After all, the only true indigenous folk amongst us are a small band from the North East who have been here for about 5000 years or so - the rest of us are all 'wetbacks' in some guise or another.

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steven fieldfare

Feb 08, 2012 at 15:52

For Anon 1.

It's not as simple as you think.

There are 3 broad categories of elderly:

Those older people who are far enough ahead in life to generate 30-50K income surpluses each year, sufficient to fund university fees for a descendent and/or provide a house deposit; while still helping those less fortunate through taxation. Thereafter, they have sufficient to pay annual care home fees without loss of capital. Their inheritors have a head start over less fortunate contemporaries from gifts and eventual inheritance. Family wealth grows generation by generation if wisely conserved and invested. Inheritors are not State dependent.

There are also large numbers who came out of WW2 and its austerity aftermath determined to get ahead and self-provide, who successfully owned their own home and sensibly provided through life insurance and savings for their surviving partner. They, too, contributed to upkeep of less fortunate and less inclined elderly citizens through taxation. But they never had sufficient surplus income to see descendents through higher education or to provide home deposits. When in need of care, they are deemed "self funders" and expected to run their capital down (frequently charged more for care home places than the State pays for its sponsored places).

Finally, there are those who saved little or nothing: either because they never had sufficient surplus to do so (and merit help); or because they did little to try, consuming in knowledge that it would all come their way anyway.

Family wealth grows generation by generation in the first group, if wisely conserved and invested. Inheritors get a good and early start in life and are rarely State dependent.

The second group strives to be in this fortunate position but increasingly finds the bar raised: high university fees and house prices have set Grandparents' gift targets much higher and frequently out of reach. Consequently, descendents find their start in life delayed over more fortunate contemporaries; and have to take on care duties or see their inheritance disappear, either way hazarding their own future security. The balance tips between an increasing number who aim to be clear of State help in old age and those who sink back into dependence on it. More tax is required to pay for care, while lower numbers of people provide it.

The trend of declining tax contribution and increased State need will be exacerbated as those in the third group see ever less merit in trying to move forward, while those at the bottom of the second group give up an unequal struggle and jump to the third group benefitting in improved day-to-day living and consumption.

Yes, introduce mandatory insurance to pay for old age among those who can afford it; but also there is an overwhelming need to encourage saving and investment within families: higher interest rates, education and housing incentives et al. Otherwise the long term aim of increasing average family wealth and self-sufficiency will be lost in an inevitable downward spiral and eventual State inability to pay for care.

The more far sighted will, of course, jump ship and go elsewhere as they see the black hole strengthen and deepen.

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Alan Tonks

Feb 08, 2012 at 17:04

S-ville- I have to assume you are partly taking your name from Smallville as you wouldn’t normally have a surname without a capital letter.

If that is the case, I can certainly understand your weird thinking. It would therefore be totally pointless of me to reply to your comments.

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Geoff Harrop

Feb 08, 2012 at 19:14

Eventually with age life becomes more trouble than it's worth. When you reach this position and want to go to sleep and not wake up then Doctors could provide a pill enabling us to avoid the indignity of being in a 'home' dependent on others for another week or so of life. You never asked to be born and a great number like me were a 'mistake' and should be helped to pull the plug when they want. If allowed this would remove a future problem for many I suspect - including tax payers. As with a dog you don't put it down until it stops wagging its tail but when the time does eventually come why try to dodge the harsh facts of life ? Face up to things as I hope I will shortly.

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Linda Rushmore

Feb 08, 2012 at 23:03

Whilst I can offer no complete solution to the problems we now face, there are 2 factors that helped bring this about.

The introduction of "Care-in-the-community during the early 90s destabilised a private nursing home industry that had made great strides towards achieving the highest standards the country had ever seen and were steadily increasing in numbers. The intervention of Social Services, with their political agenda, i.e. placing patients in inferior, expensively run council homes or keeping people at home supported by an increasingly unaffordable army of social services carers, took away much of the viability of private nursing homes. Today, this system has become horrendously expensive and we now have a bloated, inefficient public sector, matched by a run-down, poorly funded private sector.

The withdrawal of the dividend tax credit by Gordon Brown, as one of his first acts as Chancelor, has seriously undermined pension provision and general wealth of a generation. Those affected most, would otherwise have been in a better position to fund their eventual long-term care in old age. The social engineering of left-wing politics of the Blair/Brown years has given us this failure in both private and public provision of care for the elderly. We have arrived at a situation whereby we do not have sufficient provision, with few people who can now support their future private care in old age.

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steven fieldfare

Feb 09, 2012 at 16:26

For Linda Rushmore

I agree with much of what you have to say, although not completely.

All Council Homes are not inferior. While they may be expensively provided and run (I know not), my experience in Lancashire is that they are often in modern and well equipped buildings and come with lower charges than their private counterparts. For respite care, my local Council run home surcharges respite vouchers at 12 pounds a day while a nearby private home surcharges at 4-600 pounds per week. Much domiciliary care is outsourced to private companies anyway.

My own doubts over "Care in the Community" focus on: wisdom of keeping people in their own home after they become immobile, and can no longer go out; high cost of resulting social day care; and wasted domiciliary carer transit time that reduces their effectiveness on task.

My sympathy with your comment on a bloated, high cost and inefficiently run public sector has more to do with Council priorities and payrolls: the organisers remain as numerous and well rewarded as ever, while the strain is taken directly in services provided. Again in Lancashire, the CEO draws around 193K per year plus benefits, with similarly well rewarded Directors of (unreconstructed) Services. But it has become necessary to increase Day Care (4-6 hours) charges from a subsidised 5 pounds per session to between 37 and 51 pounds. The pain is, as ever, passed on to the coal face, who are least best able to argue.

Finally, while I agree with your comment over withdrawal of dividend tax credit, you perhaps should clarify that few who support their private old age care can do so from income. Around half of those in care homes have to do so still, for their first years, by running down capital (ie selling up).

I am unclear why private care homes should be under such financial pressures given high and escalating charges but offer 2 probable contributors: Councils that use Tesco bulk purchase tactics to force down the price of non payers that they sponsor; dubious care home company practice in selling off real estate and lease/mortgage liabilities to private equity while accepting expensive fixed rent escalators (Southern Cross - a probable case of expanding too aggressively and compounding the mistake with their attempted remedy).

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