Could pensions combined with insurance be a solution to the social care crisis?

Demographics tell us that by the year 2025 there will be half a million more-people aged over 85 and as a result, the care home population is likely to grow from at least 14% to possibly 34%. A burning question of our time is how is this care going to be funded?

Successive governments have failed to tackle this demographic time bomb – and so it was interesting to read how Steve Webb, a former pensions minister and now a director of a major insurance company suggests we do it.

He has described a care pension, which could combine pensions income drawdown arrangements with some kind of care insurance bolted on that would protect against future care costs. He argues that this could help people build up protection against the possibility of massive care costs later and could avoid selling the family home.

Planning and saving for future care costs is not high on most people’s agenda – however, it is difficult enough to convince people to pay into a pension, will they really be prepared to pay even more for insurance against care homes fees? Although one in four people will need residential care in later life, it’s not something that people want to think about and so that’s a big sell.

Whilst new and creative ideas to tackle the problem should be welcomed, a single product solution that Steve Webb is putting forward is not likely to resolve the social care crisis. Some form of major intervention is needed. However, remember the backlash the Conservative manifesto prompted last year when it suggested people would have to pay more for adult social care? It will be interesting to see what is proposed in the forthcoming green paper on the issue.

We believe that linking pensions and social care insurance would not work in isolation. People still believe the government will look after them, they refuse to acknowledge residential care will ever happen to them and of course, many have no idea of how much care – in all of its forms – actually costs. Perhaps a major information campaign should be the horse that is put before this particular cart.

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