Comment on Government Green Paper

Unfortunately the green paper poses more questions than it answers and leaves those requiring care, their families and the industry in general in an uncertain situation. It looks like we are a long way from a definitive plan and there are a lot of arguments, concessions and changes to come, on what will prove a very controversial piece of legislation.

Main comments:

  • No final conclusions The eventual policy is likely to be watered down compromise between conflicted demands.
  • Still years away from a national care service In the meantime hundreds of thousands of people will have to find a way to fund their care
  • New government With an election within a year, the incoming party will have their own views/plans for paying for care delaying things further

Exclusions
As with all government policy there will be small print and exclusions with all options. For example the government contribution is likely to be capped. Those wishing to move to a more comfortable, attentive and expensive home would need to top up payments which in many cases would mean using savings and property equity as at present.

Accommodation
Accommodation, food and general living costs will not be included in any future care service. These costs represent a significant proportion of the total cost of care and alone could add up to well over £100,000 if the person remains in care for several years. Those that can afford it (e.g. homeowners) will need to find a way to fund these general costs, again savings and property equity are likely to be used.

Property
A lot is made about people not wanting to sell their former home. However once a property becomes empty it is of no use to anyone and generally becomes a liability. A distinction needs to be drawn between people not wanting to sell their property for emotional reasons and those not wanting the inheritance pot eroded. After getting over the initial emotions about the prospect of care protecting the value of the estate is generally of primary importance rather than bricks and mortar that can’t be taken to the grave.

The property will need to be sold at some point, generally within 2-3 years. Everyone should consider the hassle, cost, security, market risks associated with holding vacant property. If protecting the inheritance is main concern then selling the property to release equity can mean the money can be invested more safely and efficiently elsewhere and interest/penalty costs will not roll up over time.

There is also the contradicting government policy of reducing vacant property to ease the housing shortage not increasing it by encouraging property to remain empty.

Compulsory or Voluntary
Another compulsory tax whether stealthy or not is likely to be political suicide, therefore the government is skirting around the subject. The only real way to make insurance schemes cost effective is to having a mass signup. One of the main issues with care is that no one plans for it and therefore it is going to be a battle to persuade people to make voluntary payments towards possible future care costs. Take up is notoriously low for care insurance products, even in countries with established systems such as the USA and France only a 10-20% sign up.