Advisers are also putting their weight behind the need for clients to have a clear understanding of possible future costs, should they need care. Aegon research* shows advisers strongly support clarity on an overall limit or ‘cap’ on individual contributions.
Steven Cameron, Pensions Director at Aegon said: “Social care has proven a particularly thorny issue for successive Governments. Throw in getting the UK’s finances back on a sounder footing post pandemic and the challenge for the Chancellor is even stiffer. One of the key learnings from the pandemic though is how important it is to have a high quality, properly funded care system. Further delays are simply unacceptable.
Funding social care
“Delivering a fair and sustainable social care funding deal remains one of our greatest societal challenges. The Government needs to gain public support for a deal which is fair across wealth bands and generations. Nearly three-quarters (72%) of advisers think that the responsibility of funding social care should be shared between individuals and the Government, with a similar number (73%) suggesting personal contributions should have an overall funding cap set.
Will ‘triple tax lock’ block reform progress?
“With costs often astonishingly high, clients really need to plan well in advance, potentially decades ahead of actually needing care.
This means the ‘deal’ has to be stable, if possible with cross-party support and the Government’s share needs to be backed up by sustainable and adequate funding, accepting this may involve raising taxes either on income or wealth.
Under the Manifesto ‘triple tax lock’, the Government has committed not to raise rates of income tax, National Insurance or VAT. But even in the shorter term, this leaves open options concerning Capital Gains or Inheritance tax, extending National Insurance to earned income above state pension age, or introducing a new tax, earmarked for social care, possibly levied on those above a certain age.
“Individuals also need incentives to ‘do the right thing’, which is why those who do build up savings shouldn’t face unlimited personal contributions. We strongly support a cap on how much any individual will be asked to pay for care costs and clarity on any separate charges for ‘room and board’.
The need for financial advice
“Increasingly, preparing for possible care costs will become part of managing pension, property and other savings wealth into and through retirement. Financial advice will play a hugely important role in ensuring people make the right decisions for an uncertain future.”
Aegon’s essential components for social care funding deal
• A system which provides everyone who needs it with good quality care and dignity in later life, integrated with the NHS
• Fair sharing between what the Government will pay and what individuals will be expected to pay for their own care, based on their wealth
• Long term stability, ideally with cross-party support
• Wide acceptance that the approach is fair across generations and wealth bands
• Sustainable Government funding of its share, with transparency over how this will be raised from existing resources or new taxation measures
• Adequate resources at local council level ending the current care lottery across regions
• Encouragement through tax incentives for people to save in advance, possibly linked to pensions
• A clear and understandable way of determining personal contribution towards care costs with an overall cap
• Access to professional advice on the most suitable way of planning ahead to fund personal contribution
• Clarity on other ‘room and board’ costs with choices to suit individual needs and preferences
• Clarity on whether or not an individual’s home is counted as part of their assets when being assessed for a personal contribution based on wealth
• Increase or scrap the pensions lifetime allowance to allow people to fund for their ‘normal’ retirement needs as well as care costs within their pension
*Research carried out with 202 financial advisers between 3-9 February 2021.
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