View the article online at http://citywire.co.uk/money/article/a564672
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.
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.
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