How to solve the elderly care crisis? (Birmingham Post Article 11.10.2018)

Everyone knows that social care for the elderly is in crisis but it seems no-one can come up with a better system, one which will command sufficient support.

Lots of ideas but so far no consensus.

Currently you have to pay so long as your savings are more than £23,250.

Above the threshold you might find yourself charged £40,000 to £50,000 a year for residential nursing care, often necessitating selling the family home, something many people bitterly resent.

Below the threshold the local council steps in but how much they are prepared to pay varies across the country and you could find yourself being asked to find top-up fees, putting pressure on the wider family.

A Government Green Paper is in the offing, expected this autumn.

What might it propose?

Three of the favourites are:

  • A social care premium.
  • An inheritance tax rake off.
  • A Care Isa.

The first two possibilities were floated this summer in a joint report by Parliament’s Housing, Communities and Local Government and Health and Social Care Committees.

The social care premium would be paid by the over-40’s including those aged over 65.

This would be either as an additional element of National Insurance or with the premium placed into a dedicated not-for-profit social insurance fund that could only be used for social care.

As to IHT changes, the joint report says these are required “In order to remove the catastrophic cost of care for some people”.

It suggests that a specified additional amount of inheritance tax should be levied on all estates above a certain threshold and capped at a percentage of the total value.

A further element is reform of council tax valuations to bolster local government contributions.

Meanwhile the Care Isa concept was floated out by the Government in August.

It produced plenty of criticism, with commentators arguing that it would only benefit a small minority of the population and complicate the Isa system.

Isas are currently taxed at death, which means that people are incentivised to spend these savings in later life to avoid IHT. In contrast, the proposed Care Isa would be designed to secure funding for later life care, with any amount left after death protected from IHT. This could be passed on to beneficiaries tax-free.

But, as some pointed out, defined contribution (DC) pensions can be used to fund care costs.

Steven Cameron, pensions director at Aegon, told Moneywise: “Under the pension freedoms, individuals at retirement could notionally ‘ring-fence’ or set aside part of their retirement fund to meet possible future care costs, taking an income from the balance. Pension contributions also benefit from tax relief on the way in, making it a highly tax-efficient way to save.”

There has also been speculation that people could be allowed to take money out of their pension fund tax-free if it is used for care costs.

Much is expected of the Green Paper as Moneywise discovered in comments from Caroline Abrahams, charity director at Age UK, and Mike Birtwistle, founding partner at Incisive Health.

Ms Abrahams said: “It is crucial that the forthcoming Social Care Green Paper isn’t yet another failed exercise.”

Mr Birtwistle added: “The Green Paper must grasp the nettle of this challenge and propose a realistic and funded plan to address the immediate crisis, as well as delivering longer term reforms to ensure the fairness and sustainability of England’s social care system. Ducking the issue cannot be an option.”

But, given the “dementia tax” proposal was deemed largely responsible for the Government losing its outright majority at the last election, it is likely to tread carefully this time.