The Commission on Funding of Care and Support (the Dilnot Commission) is due to set out its final recommendations in early July, to overhaul the way long-term care is funded in the UK. In advance, this short paper assesses the possible implications for consumers and financial services of a likely new partnership model.
The CII's central argument is that whilst the new model is likely to address many of the fairness issues associated with the current system, engagement problems will still persist. This could have serious consequences for consumers by preventing them from building and preserving their wealth in the most effective way.
For example, many individuals will still need to consider using assets to fund long-term care in the ‘new world’ even though many appear to be reluctant to using their home as a means to fund this cost. It is therefore essential that people plan in advance in order to minimise losses on non-pension assets.
To counteract this lack of engagement we set out the following recommendations:
1. Education is key to winning the battle to raise awareness - currently nearly 8 in 10 people have no idea how much they will have to pay for care. The Money Advice Service will be able to help in this regard but the Government should do more. A large scale information campaign about the need to save for retirement and plan for long-term care costs may help to close the perception gap and ultimately lead to less people falling back on the state for support. Industry and consumer groups will also have vital roles to play in informing consumers appropriately about the options that are available to make the process of paying for care less painful.
2. Trust: Just providing more information will not be sufficient to improve engagement with financial services and the private care sector. Consumers must have trust that the products and advice that they invest in will deliver outcomes in line with their preferences and future expectations. This will be a challenge given the complex empirical relationship between disability and longevity, making predictions around future care needs harder to model than life expectancy. Similarly, many customers will continue to buy products related to long-term care as a ‘distress purchase’. Providers and distributors must continue to work hard to develop and deliver products to consumers with due care and attention to these additional sensitivities.
3. Certainty around future rules: For the private sector and consumers to be able to plan effectively for the future, they must be confident that the funding model the Government ultimately chooses will be here to stay. Government and opposition therefore must do their best to provide certainty around future rules – making cross party support for Dilnot’s recommendations vital.
The Commission’s proposals are likely to provide the building blocks from which a new and fairer system can emerge. Without improving levels of engagement however, the public could still be left ‘out to dry’. It is not enough just to have a new public policy vision for care – it must be backed by the government, consumers and the relevant private sector and voluntary sector partners. Only then will we have a Beveridge-style plan for the 21st century.
Contact:
If you have any questions or comments on this paper, please contact Ben Franklin, Policy and Research Coodinator at the Chartered Insurance Institute. Email: ben.franklin@cii.co.uk; Tel: +44(0)20 7417 4782
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