The pension freedoms has been blamed for the four-year delay in implementing the government’s care cap, with one national adviser stating that providers simply have too much on their plates to come up with new innovative products.
The £72,000 cap was due to be implemented by April 2016, but earlier this month it was revealed that the Department of Health would delay this until 2020 following concerns expressed by the Local Government Association and other stakeholders about the timetable and costs involved.
A letter sent by Alistair Burt, MP for community and social care to councillor Izzi Seccombe, chair of the Local Government Association, dated 17 July, stated that the new pension flexibilities have created “a real opportunity for us to work with the financial sector to look at what new products may be developed”.
However, national adviser LEBC Group’s divisional director Kay Ingram told FTAdviser that the at-retirement reforms were exactly the kind of distraction that has stifled innovation on insurance for long-term care.
“The government wants providers to come up with new products, but has given them so many other things to be working on, what with the pension freedoms,” she stated, adding that long-term care is an area that is surprisingly difficult to insure against.
Mr Burt’s letter added that he will be holding an “urgent meeting” with representatives from the insurance industry along with the Treasury and other government ministers to work through how government can help providers bring forward new products.
As previously reported, several providers are working on dual life insurance and long-term care protection products to help boost cover and reinvigorate the market.
Tony Mudd, divisional director for tax and technical support at St. James’s Place, said that those much nearer the point at which care is required should be talking to families about the most efficient way of de-cumulating their assets to pay for care.
Jim Boyd, corporate affairs director at Partnership, explained that any delay to the cap would be a source of uncertainty and anxiety for consumers, although another five years of the same policy conversely gives clarity for advisers working in this area.
“Crucially the government also committed to a publicity drive on care, so we hope this will be the impetus for more advisers to make the investment in getting the qualifications to sell the relevant products.”
Mr Mudd also stated that he did not believe costs were the only driver for the delay, highlighting that estimates of implementing the Care Act have varied widely, although health secretary Jeremy Hunt recently put them at £6bn over the next five years.
The International Longevity Centre-UK recently published a white paper arguing that the state’s strategy for later life funding must secure effective funding for adult social care and find ways of ensuring the provision of mass market financial advice.
It also suggested that the government should incentivise downsizing, supporting innovation in the equity release market, although ILC-UK senior research fellow Ben Franklin added: “There’s a reliance on housing wealth to fund care, but property suffers from price volatility and is very illiquid.”