Evolution of long-term care funding products

With the Care Bill in its final stages, Stephen Lowe, group external affairs and customer insight director at Just Retirement, says the structure of the new system is being finalised although many of the finer points will still need to be added in the coming months.

In January the Association of British Insurers and the Department of Health signed a ‘statement of intent’ to work together to ensure people receive appropriate information and advice and to create the market conditions for the development of existing products and the introduction of new ones.

The statement identified three areas for adding flexibility to existing products:

• The first was around annuities and retirement income, allowing a stepping up of income when someone needs care.

• The second area is products helping people release housing equity without selling their homes.

• The final area was in protection products such as health, life and illness cover that could include care cover.

Mr Lowe says: “Increasing demand from an ageing population having to fend for themselves financially has the potential to energise the market for care advice and products.

“Crucially, there is now an acceptance at the highest level of government of the need for significant investment in a high profile public awareness campaign that will make it clear that individuals – not the state – must provide.

“National and local government will have an important role alongside the financial services sector, bodies such as the Money Advice Service and voluntary organisations.

“People require a synergy of care planning and care products to organise their care funding in the most effective way. Care advisers have a great opportunity ahead of them.”

Roger Marsden, head of strategy for at retirement at Aviva, says a number of financial services providers made statements in support of the ABI’s statement of intent.

While it is not clear yet in what way this will happen, Mr Marsden says it is likely to include a range of solutions which allow people to better understand the care needs they may have in later life and plan accordingly.

At the moment, with the advent of the Care Bill, Mark Stopard, head of product development at Partnership, says many providers - while keen to develop products – are awaiting further details before they commit time and resource.

However, he says some products which might logically be developed include:

1) A pensions product which has an element that can be used to pay for care. This annuity could transition from paying an income to the person to paying for care when someone enters a home.

2) A regulated product which uses the equity in a person’s home to pay for their care fees without the need to sell the property.

According to Janet Davies, managing director of Symponia, any new products need to be: flexible, non reviewable, tax efficient, simple to understand, tailored to legislation, not based on ADL failure and only written by suitably qualified advisers.