Save, make, understand money


BLOG: Caring for our future

Nicola Brittain
Written By:
Nicola Brittain

The proposal to ensure local authorities provide loans to the elderly for the purposes of care has been broadly welcomed.

Today the government released its long-awaited white paper, Caring for our future: progress report on funding reform‘.

The paper meets many of the recommendations made by the Dilnot report released last July, including the recommendation that long-term care costs are capped.

However, it said the government was considering cheaper options than the £35,000 cap recommended by the report and that it would make a decision on the amount at the next spending review.

Among the options the government said it was looking at was raising the level of the cap – £75,000 has been suggested – or asking people to opt-in by paying an upfront fee. Those that did not pay the fee would face unlimited costs.

This postponement of the cap has been met with consternation by the industry:

Stephen Gay, director of life, savings and protection at the Association of British Insurers said: “We are deeply disappointed to see social care funding reform yet again left in the government’s pending tray. Governments past and present have for four parliamentary terms consistently failed to make a firm commitment to tackling the care crisis, at the expense of not just those needing care, but their families, carers and wider communities.

“These frustrating delays have left people in constant limbo, unable to plan ahead and facing up to funding their care when it is too late, with this burden inevitably falling on the NHS and local communities crippled under stretched budgets.”

Vince Smith-Hughes, retirement expert at Prudential, said: “People realise that living longer may mean they will need a higher income as they get older, but few of them have made the connection between the risk of ill-health, and needing money to pay for healthcare.”

“Just 20% of people retiring this year have set aside money for any long-term care needs and this drops to 16% among those aged 65-plus. Less than half of this year’s retirees have planned for the fact that they may need more income in retirement as they get older.”

A second significant proposal made in the white paper would be that local authorities will be required to offer elderly constituents in need of long-term care a loan that they would pay back following the sale of their house.

It said it would provide £200m to local authorities to enable implementation for the scheme.


Brian Tabor of CareMatters said: “Ensuring that a local authority provides a loan to cover the costs of long-term care provides a tiny amount of stability in an otherwise very unstable area. However, how successful the scheme will be will depend on how it is implemented.”

“I am cynical about this actually. Will the government provide enough money to cover the costs, and if not, how much will come from the local tax payer. The burden will vary according to the mix of old and young people in any one borough.”

“A better solution in my view would be for the government to enter into a partnership with an insurance company and underwrite policies for the provision of care. There are currently almost no pre-funded insurance policies on the market for long-term care.”

Tabor is a Chartered Financial Planner specialising in providing advice to later life clients

Mike Shaw managing director of Hedley Asset Management said: “This scheme will help in the specific cases where equity release is not available. But in my view a really useful measure would be to enable people to use part of the money on loan from local authorities to pay for independent financial advice.

“An adviser would be able to assess the impact of the move on estate planning whether it is more or less efficient than equity release or long-term care insurance for example.”

“A government back scheme promoting long-term care insurance would also be very welcome. The market for this has almost completely died off in recent years.”

Three of the seven advisers at Hedley are qualified to offer long-term care advice.
Helen Kanolik managing director of Helenk Financial Advice said:

“I welcome the paper, although it’s not a huge change – many local authorities do this already but some don’t charge interest.

“I would be interested to know how much interest will be charged. A government backed loan of this sort will be more cost effective than a private scheme.”

Kanolik specialises in retirement and long-term care planning