However, the expected rise in costs year-in, year-out due to an ageing population suggest other changes that encourage costs being met from private pensions, insurance solutions and alternative funding solutions are also going to be needed in any longer-term package. Alongside these survey results, the ACA has published a Placard discussion paper exploring the developing crisis and pointing to solutions with contributions from Sir Steve Webb, the former Pensions Minister, and Tom Kenny, Chair of an IFoA Health & Care Working Party.
Key findings in the report
The ACA survey, which was conducted over the summer and received responses from 349 employers of all sizes, found:
72% of employers say social care costs borne by individuals should be capped.
41% of employers say tax changes should be made that encourage social care costs being met from private pensions, but 40% oppose[3] such a move, perhaps over concerns that pension contributions at present are generally too low to fund comfortable retirement incomes, never mind another cost.
66% say the rising costs of social care should be met by generally higher levels of tax or NI, with 47% saying the higher taxes should be met solely by employees.
45% say employees working past State Pension Age should pay NI to help meet social care costs, but 38% oppose this reform, which has been suggested from a number of quarters recently.
Whilst 37% of employers say inheritance tax should be reformed allowing more tax to go towards social care, 46% oppose3 such a move.
Just 19% support a new compulsory insurance scheme to meet social care costs, with 29% opposing such a reform – the majority, however, being ‘undecided’.
The Placard published alongside the survey results notes that ‘permanent solutions are necessary if we are to stem the drain on NHS resources and already-stretched local authority budgets. We cannot resolve these issues simply by throwing cash into a failing system…’ The issue’s editor, Tracey McManus, concludes in her editorial that ‘whatever the approach (in the upcoming Green Paper), it must look to deliver an integrated savings policy for later life – factoring in that younger generations have much lower savings and no ‘generous’ defined benefit pensions to fall back on. It must also offer genuine incentives to those who can afford to save whilst also providing an underpin that secures a good standard of care for all.’
ACA Chair, Jenny Condron, commented: “Our survey findings suggest that employers are as uncertain as the politicians as to how rising social care costs can be funded. Whilst tax rises have some traction in meeting the immediate problem, a constantly rising tax rate to meet this and other funding priorities seems likely to prove increasingly unpopular, particularly if it falls on the working population.
“It will be interesting to see whether the Government’s upcoming and long-delayed Green Paper will be wide-ranging as we hope, looking at longer-term pre-funding solutions, such as a social insurance scheme – which the Secretary of State responsible seems interested in – or the ‘care pension’ concept championed by, amongst others, Sir Steve Webb, or – for example – other ways, such as re-setting and re-framing the cap so it is an ‘all-inclusive cap’.
“Certainly, in this complex area, actuaries have a role to play in helping Government find a solution to social care funding by developing insurance solutions; developing equity release products to fund social care and applying knowledge of demographics and long-term financial modelling to propose alternative funding solutions.”
Further reports on the Pension trends survey’s findings are due to be published over the next two months and a final report in November. Download the Placard on ‘Social Care in Crisis: Finding a comprehensive longer-term solution’
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