Long term care pensions

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Once you pass the age of 60 your worries are likely to be less about the inevitability of death, but the extent, length and cost of long-term care as you enter old age.

The need for long-term care – not just medical care, but the general help and support often required for such everyday activities as getting dressed, washed, eating, going to the toilet and general mobility – of course, differs from one individual to the next.

Might long-term care pensions provide a solution to the problem of meeting long-term care costs?

Long-term care costs

But if there is one thing that unites everyone as they grow older, it is the concern about long term care costs.

The fears are hardly surprising. The UK Care Guide estimates that the weekly cost of long-term care in a residential home is likely to be at least £250, rising to £1,000 a week for homes offering higher standards of accommodation and a further 20% to 25% on top of those basic costs if nursing support is also required.

Worries escalate still further with the realisation that if you own assets – including your home – of more than £23,500 your local authority is unlikely to offer any financial assistance towards the cost of long-term care.

Capping long-term or social care costs

On the 7th of December 2017, the Telegraph newspaper reported that the government had stepped back from a previously announced intention to cap lifetime social care costs for any individual at £72,000.

Instead, it has promised consultations on a thoroughgoing reform of social care provision in the UK.

Long-term care pensions

The idea of a total care costs cap has not gone away, however. A former pensions minister has suggested that such a cap becomes part of what he calls “long-term care pensions”.

In a speech reported by City AM on the 19th of February 2018, the former minister, Steve Webb, suggested the creation of products providing long-term care pensions. These might be drawn down upon retirement, he suggested, in much the same way as a regular pension, but with the specific purpose of insuring against the lifetime cost of an individual’s care requirements.

In addition to a government-regulated cap on an individual’s total lifetime care costs, the former minister also insisted that payments into such an insurance scheme would need to be tax-free, but might represent a way for millions of Britons to start saving for the long-term care they may need in their old age.

The availability of long-term care pensions might encourage people to start thinking about the financial provision they need to make when their health begins to fail, and support is required to help them with essential, everyday activities such as getting dressed and washed, going to the bathroom and generally taking care of themselves.

Such products might also encourage a shift from an apparently widespread beliefs that:

  • the provision of social care in old age is the responsibility of the state alone;
  • your mortgage-free home will end up paying for your long-term care

Whilst this suggestion appears to have merit, government ministers have yet to respond, and it remains to be seen to what extent – if at all – the innovative proposals are taken on board during the current consultation process on meeting long-term care costs.

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