Funding for care has crept further on to the agenda in the past few years off the back of the Dilnot commission.
But even with a cap on care costs, many will struggle to pay the cost of care should it become necessary.
A new product pitched by Cass Business School, in conjunction with the International Longevity Centre UK, aims to ease the burden of paying for care in addition to incentivising people to make provision for themselves.
Personal care savings bonds (PCSBs), proposed by Professor Les Mayhew and Dr David Smith of the business school, would work in a similar way to premium bonds in that they would pay monthly prizes, free of tax, which could either be claimed or reinvested.
Unlike premium bonds, however, they would accrue monthly interest and could be purchased by any adult at a nominal value of £1 each.
They could only be cashed when the owner passed a social care assessment or died.
The proposal, which was presented to the House of Lords on 13 June 2013, tackles a number of key issues inhibiting saving for long-term care. Pre-insured care models have failed in the past, with little public engagement and a sense of paying for something that may never happen. PCSBs would have the incentive of prizes and interest as recompense for putting something away to not be touched. The chance of winning over a lifetime is shown in Graph 1.
It also addresses the issue of leaving money to the estate. The only active model for paying for long-term care is the immediate-needs annuity, whereby a lump sum is exchanged for a lifetime annuity designed to pay the care fees.
As with any annuity, this requires irrevocably handing over a lump sum. Under the PCSB model, if an individual died without ever needing care, the money could be passed on as inheritance.
According to Cass, once fully mature, the total fund could be worth £80bn and make a contribution of £2.5bn pa to the UK care economy.
