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Home > Pensions > Personal Pensions

By Kevin White | Published Dec 12, 2012

Innovation lacking in care funding: report

The 28-page document, The Cost of Our Ageing Society, said governments needed to consider linking eligibility ages of state pension to life expectancy, as well as make labour markets more accessible to older people.

The document also called for ongoing investment in research and data collection to combat uncertainty and to create sustainable policies.

Baroness Sally Greengross, chief executive of ILC-UK, said: “Our ageing society will have significant impact on state spending on pensions, health care, long-term care and unemployment benefits.

“Across the world, people will need to continue to work longer as a result. In the UK and across the world we will also have to innovate in health and deliver a sustainable funding settlement for social care.”

The study follows the release of Andrew Dilnot’s long-awaited report into social care reform and a progress report on funding reform, which propose a cap on individual contributions to care costs and an increase in the threshold above which individuals must pay full care costs from £23,350 to £100,000.

So far, the Coalition government has not backed the Dilnot proposals, while a department for health spokesman confirmed that a publishing date had yet to be set for a White Paper on the funding reforms.

Brian Tabor, director of Herfordshire-based Care Matters, said: “In terms of care fee funding, people will have to learn that the government cannot afford to shoulder the whole cost, and that there will be a proportion of their assets which will have to go towards paying for some of the cost of residential care.

The nursing element will continue to be paid by the tax payer, but people will likely have to contribute towards the accommodation costs. The figures bandied about around the Dilnot report refer to these care costs, and this is the hardest thing to get across to the public. There needs to be a differentiation between the two. The problem is that many people look for any excuse not to prepare for these care home fees.”

Emma McWilliam, a consulting actuary for report sponsors Milliman, said: “Inter-generational collaboration is key, especially given high rates of youth unemployment. If those at working age are not employed, simple old age dependency ratios do not show the complete picture to governments on how best to deal with the challenge ahead.

“Additional measures such as labour market adjusted ratios, as set out by the European Policy Centre, that effectively encourage policies around employment are a step in the right direction to build public policy that reflects the current demographics and needs of our future society.”

Key findings

Age-related spending in the UK is projected to rise from 21.3 per cent a year to 26.3 per cent of GDP between 2016/2017 and 2061/2062.

This is a rise of 5 per cent of GDP, or the equivalent to a rise of roughly £79bn.

The yearly cost of spending on public pensions is projected to rise from 8.9 per cent of GDP to 10.8 per cent by 2061/2062, equivalent to a rise of £33bn

Spending on healthcare and long-term care is also expected to rise substantially.

Sources: ONS, EC 2012 Ageing Report, OBR’s Fiscal Sustainability Report

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