James Coney  

Social care clarity could help inheritance

James Coney

James Coney

I am convinced that fear of the costs of social care is what prevents most families from redistributing their wealth before they die.

Financial advisers tell me that it is easy to start a conversation about retirement planning, but getting clients to think about the costs of what comes next is fabulously problematic.

As last week’s report into social care by Conservative MP Damian Green said: “It is unclear to most people what is available, what is funded by the state and what needs to be paid for by the individual.”

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There will, of course, be those who simply want to spend their cash; they have earned it, they should be entitled to do as they please.

There are enough baby boomers in retirement now, with handsome final salary pensions, who do not have to worry about running out of money and the cost of social care when they eventually need it. The burden of their care will not fall on their families.

They are worried, though, about the quality of their care, after all, who wants to spend their final days in a sparse, tiny room, with food that is worse than most school dinners?

You cannot really plan for how much social care will cost. The average time in care is just over two years, but my grandmother, for example, was in a home for 15 years after she suffered a stroke and later dementia.

The fact inheritance has become demonised is a greater tragedy for the have-nots than the haves.

Handing down the masses of accumulated property wealth to younger generations could be the great income redistribution of our time.

The cost of social care is such a toxic issue that it effectively cost the last election, when Prime Minister Theresa May ended up being harangued on the doorstep over her ‘dementia tax’.

So, Mr Green’s suggestion is more tax, specifically 1 per cent more on national insurance for those aged over 50, which would yield about £300 a year per person on average, as well as a one-off payment in retirement of £10,000 to £30,000 for those that want better quality care.

This tells us two things: firstly, that revenue-raising is well and truly back on the table for the Treasury. Last month, a House of Lords committee suggested that workers of state pension age should now pay national insurance.

Secondly, that the care Isa, advocated by people such as former pensions minister Baroness Altmann, seems like it is coming closer to reality as the onus increasingly focuses on private saving.

This will add a whole new dimension to financial planning, convincing clients to set aside a separate pot of cash.

I suspect many households will not like Mr Green’s reforms on social care, mainly because they restore a link between property wealth and payment of costs. Families just do not like the idea of giving up some of their perceived inheritance for a service they think should be provided free.