It was announced last month that the government was looking at a proposal for those over 40 to be taxed, either through their employment or an insurance policy, to pay for their later life care.
It’s a relief that after years of ignoring the later life care crisis, the government is now considering new proposals on how to fund care and how to protect the elderly and vulnerable of the future.
With other financial commitments during your working life, it’s very easy to put off saving for later life care. This proposal would compel workers to plan for later life and to save early enough to have a sufficient savings pot.
This firm’s research with the Centre for Economics and Business Research found the social care funding gap was set to increase to £2.5 billion by 2024/25 and workers needed to be saving £575 a month to pay for later life care. If left unresolved, the UK’s ability to support tens of millions of elderly people was set to collapse by 2029, leaving potentially millions of elderly people without reasonable care for their later years. Despite the government's quick denial of the issues it’s likely we haven’t heard the last of this proposal.
One advantage of the proposal is that there will be more options in regards to the care you receive and where it’s to be received. Care at home could be a financially viable option for more people and less people are likely to have to sell their property to fund their own care.
The government will need to consider how the scheme will be implemented, and consider the difficulties that could come with it carefully. If a scheme like this is going to work, it’s vital for it to be compulsory, to ensure people don’t continue to put off saving for later life.
A difficulty for those on lower incomes is that they may have already accounted for every penny they earn and would struggle with the additional financial commitment. Questions must also be asked as to whether they’ll have saved enough to fund their care or whether there will still be a funding gap to address. The local authority may still need to assist and therefore the government still need to consider how the funding gap will be financed. The very wealthy will still be in a better position when it comes to choosing their own care.
Another consideration is that those currently in their 50s are unlikely to have long enough left in their career to save sufficiently to fund their own care.
As the country is currently in a recession, the timing of any announcement regarding saving for care will be key. This issue cannot be ignored indefinitely but placing additional financial burdens on workers at the current time is unlikely to be well received.
In Germany and Japan, they’ve already adopted similar models in order to address the gap in funding for later life care. Our Government can therefore look at their existing systems and learn from their advantages and also their mistakes.
Whether this proposal, or another, is adopted, it’s good to see the government is addressing the important issue of care funding. Any system adopted will have both advantages and disadvantages and this needs to be weighed up and experts in the later life sector need to be consulted, before implementing a new proposal of this nature.
Published: August 2020
A monthly briefing from Irwin Mitchell
August 2020
For general enquiries
0370 1500 100
Or we can call you back at a time of your choice
Phone lines are open 24/7, 365 days a year
