New products will prevent ‘cliff edge of care’
The UK long-term care industry needs to develop a range of new products to avoid the “cliff edge” effect that sees millions of people in danger of losing their homes and savings to fund long term care, Ben Rickayzen has said.
Speaking at the International Conference on evidence-based policy in long-term care in London today, Mr Rickayzen, an academic at the Cass Business School, said the current system left those with incomes or assets higher than the £24,000 threshold on a “cliff edge”.
Addressing delegates from the global LTC sector, he stated that only 400,000 households over 65 in the UK could currently afford institutional care for more than one year on the basis of their income alone. This figure grew to 3m if savings were included and 4.6m if home equity was included.
But pointing to the fact that not every householder wanted to consider equity release, he suggested that government and product providers should investigate the creation of four new types of product to complement ER and immediate needs annuity products.
Mr Rickayzen suggested a combination of top up insurance, which bought the difference between income and LTC cost, in addition to accelerated life insurance, which paid out similarly to critical illness life cover could help bridge the LTC funding gap, while a disability linked annuity product could also offer a solution.
But arguably the most radical idea to stem from his presentation was an LTC bond in the mould of premium bonds, where people could save up for a fixed cost for LTC care.
If care wasn’t needed, the money would then be transferred to a person’s estate to pay for after death costs such as funeral expenses. He added that the bond could offer prize draws and “would at least be some contribution”.