- Andy Burnham has been speaking about the need to reform social care
- At the moment, the Casey Commission is looking into the issue
- It was due to make medium-term recommendations this year for improvements to care, then report on long-term reform in 2028, but Burnham wants the process to be accelerated
- This is the latest in a long history of attempts to reform social care, so it’s worth making your own plans, just in case
Sarah Coles, head of personal finance at AJ Bell, comments:
“Andy Burnham has pledged to grasp the nettle on social care. However, this reform has been just around the corner for almost 30 years: Tony Blair told the Labour Party Conference in 1997 that it needed to be addressed urgently. So while we can hope for swift change, it also makes sense to have a safety net of our own, just in case.
“Politicians of all stripes have agreed there’s a problem. Where they run into difficulty is how to pay for the solution. This isn’t the case throughout the UK. In 2002, free personal care was introduced in Scotland. However, in England, significant structural reforms have yet to materialise.
Action
“There have been more than 20 social care commissions, select committee inquiries and white papers on social care since 1997. The Sutherland Commission, set up by Blair, recommended free personal care, paid for through taxes, and a more generous means test of £60,000 for housing and living costs. However, the costs involved meant the government didn’t accept the findings.
“Since then, the solutions have tended to focus on a more generous means test, and some sort of lifetime cap on the cost of care - although in each subsequent proposal, the lifetime cap has risen. It was suggested by the Dilnot Commission in 2011, which proposed a £35,000 cap. In 2013, the government suggested a £72,000 cap, and after that fell by the wayside, a new plan in 2021 suggested a cap of £86,000. It remains to be seen whether the latest commission will follow this pattern, or return to recommending free personal care.
Inaction
“Unfortunately, instead of actually implementing any of these proposals, governments have fallen into a pattern of postponement. The Dilnot Commission reported in 2011, and the government at the time put off responding to it on the grounds that the country’s finances weren’t in good enough order. It finally made proposals in 2013, with plans to introduce changes in 2016. Then in 2015, the start date was postponed to 2020, before eventually being dropped.
“The revolving door of political leadership means that in the endless gap between proposals and action, either there’s an election or change of leader, and the newcomer baulks at the cost. It scuppered coalition proposals for a lifetime cap from 2016, when the election of 2015 brought in a Conservative government with different priorities.
“Boris Johnson’s 2021 plan subsequently unravelled under the short-lived leadership of Liz Truss, when the Health and Social Levy on National Insurance designed to pay for changes was scrapped and reform was postponed until 2025. The dividend tax rate hike that accompanied as part of the funding plan remained in place, although the money wasn’t ringfenced for care. In 2024, under the new Labour government, these proposals were scrapped altogether, on the basis that money hadn’t been set aside to pay for them. All this attempt at reform managed to achieve was a hike in taxes for investors and entrepreneurs.
“It’s clear that any solution will need some kind of cross-party consensus, but this has proven elusive for so long. Each potential solution has been given a memorable name by political opponents – like the death tax or the dementia tax – which helped drive the nail into the coffin of those reforms.
“The constant cycle of pledges, commissions, proposals, postponements and cancellations, has meant successive governments have left key parts of the system untouched. The means test, which determines whether you can get help with care, sets lower and upper limits – so those who own less than the lower level have all their care costs covered and those who have assets between the lower and upper levels get some support. These have been frozen since 2010 at £14,250 and £23,250. If they’d risen with inflation, they would now be £26,690 and £43,546.
What can you do?
“It’s worth hoping for the best, but preparing for the worst. If you’re getting older, and are assuming a family member will step in if you eventually need more support, you need to talk to them about it. Check whether this is realistic, or if you need to consider more formal care.
“The sheer cost of care can make it difficult to build enough savings. However, if you have emergency savings to cover 1-3 years’ worth of essential expenses, then later in life it can help cover the cost for a while. If you’re making preparations early enough in life, you could consider investing, to give your money the best possible chance of growth over 5-10 years or longer.
“Some people will ringfence money in their pension for care. If you intend to do this, it’s worth using a pension calculator to see what your pot might be worth at retirement. You may need to increase your contributions so you can take the income you need, and still cover the cost of any care.
“If you take this approach, you run the risk that if you don’t need the money, there could be inheritance tax on any money left in your pension when you die – if you bust your allowances and live beyond 5 April next year when pensions fall into the inheritance tax net. However, you may well decide that this is a better risk to take than not having the money available at all.
“There’s a good chance that many people will need to use the value of the family home to cover the cost. Some will try to rent it out – although this comes with risks and costs you need to think through carefully. Some will use equity release, or use a deferred payment agreement with their local authority (where the care fees roll up and are repaid when the property is sold). Others will sell the home, which can be a cost-effective solution if they can face the prospect.
“Once you have the cash available, you can also weigh up the possibility of buying a long-term care annuity – also known as an immediate needs annuity. These tend to have much higher incomes than normal annuities, because your life expectancy is likely to be lower. They also pay out tax-free if the monthly payment is made direct to the care provider. It can be difficult for people to consider, because it involves a significant outlay upfront, but if you expect to need care for a considerable period, it can pay off. Over the years, various governments said they hoped that new insurance products would evolve to help solve the issues around long-term care, but as yet, these haven’t materialised.
“You might think this kind of planning is unnecessary if there’s a solution just around the corner. However, you’d be forgiven for having thought that in 1997 too.”
