Over-65s face social care ticking time bomb

Jul 17, 2019

The number of people needing social care in later life is on the rise, but worryingly low numbers of people have made any provision to pay for it.

Recent research from the Association of British Insurers (ABI) showed only 10% of over-65s have planned to pay for social care later in life.

More than half (51%) said the state pension would be their most likely source of funding, while 26% would sell their home to pay for care.

Yvonne Braun, director of policy, long-term savings and protection at the ABI, said:

"The social care system and how it is funded desperately needs an overhaul. People simply aren't preparing to pay for their care costs and this needs to change.

"With only one in ten over-65s making provision to pay for care, the size of the financial time bomb is clear for everyone to see."

Council support

Under current rules, social care funding from local councils in England and Northern Ireland is available for individuals with savings and assets under the threshold of £23,250. This includes the value of their home if they move into a care home.

Anyone above these thresholds will need to pay for care themselves, with high fees to cover.

The NHS said the typical rate for a carer to come to someone's home is around £20 an hour, depending on the location.

A live-in carer could cost between £650 and £1,600 a week depending on the type of care needed, while a room in a care home could cost £600 a week, or £840 a week for 24-hour care.

Social care crisis

A combination of cuts to local council spending and an ageing population means the social care system is under increasing pressure.

The Government is due to publish a green paper looking at social care in England, but this has been delayed several times amid Brexit and political upheaval.

By the time it is published, it could end up taking a very different form to the one originally planned.

It's one of several attempts to address the issue in the past 20 years, including a number of proposals which never came into force.

But several groups have called for action from the Government with increasing urgency.

The future of social care funding

The ABI suggested five different options for improving social care funding. These are:

  • making pension income used to pay for care exempt from income tax
  • tax-free pension withdrawals if used to purchase an insurance product that covers care costs
  • introducing a new care ISA with no inheritance tax paid on residual amounts at death
  • releasing equity from a property to purchase an insurance product that covers care costs
  • pledging equity from a property to cover care costs.

More recently, the Lords economic affairs committee has called for an £8 billion investment into social care, and an NHS-style free system by 2025.

Options for self-funding

Savers can take steps now to prepare for covering their own future care costs, or those of relatives.

Care plans offer a guaranteed income for life in exchange for a lump sum, at a cost depending on a person's age, health and required level of income.

These can't be cancelled once they're taken out, which could be expensive if circumstances change and the funding is no longer needed.

There are immediate care plans if funding is needed right away, or deferred ones if it's not.

Medium to long-term investment bonds are another option. As long as these are taken out before the care is needed, their value usually won't affect means test calculations for care funding.

Bonds usually need to be kept for at least five years and there may be penalties if you cash them in early. Their value can fall as well as rise, so returns are not guaranteed.

Downsizing is often a practical option to raise funds, or you could think about renting a room in your house, cashing in savings and shares, and checking whether care costs are covered in any existing insurance policies.

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