Former pensions minister Sir Steve Webb has dismissed the idea of introducing a policy akin to auto-enrolment for social care, which the government is currently considering.
At a hearing in front of the Economic Affairs committee in the House of Lords yesterday (November 27), Sir Steve, now director of policy at Royal London, said he was "baffled as to how auto-enrolment could work in this context".
He said: "If I’m 30 years old and I could opt out of something which might pay something in 50 years’ time, I would opt out like a shot.
"It would be mad not to, because the policy will change 15 times before you get there."
Matt Hancock, secretary of state for health and social care, revealed in September that one of the solutions to be included in the government’s forthcoming green paper on social care would be a product akin to pensions auto-enrolment.
This would mean that every adult in England would be expected to pay into a national fund to cover their care needs in later life.
Auto-enrolment was introduced in 2012, leading to almost 10 million people now being auto-enrolled in a pension scheme.
Daniela Silcock, head of policy research at the Pensions Policy Institute, agreed such a policy would not be an ideal solution for care.
She said: "Auto-enrolment needs to be isolated as pensions savings, because even when contributions go up to 8 per cent, people still aren’t going to be saving enough to provide themselves with what they see as an adequate income at retirement.
"Adding any other burden on top of that might muddy the waters and make it difficult to make people contribute enough. I would be weary of combining the too."
Sir Steve added: "Everyone knows they need income in retirement at pension age. For me this [social care] is an insurance issue and not a savings issue.
"I only want people to set, let’s say, £20,000 aside to insure themselves against a risk of catastrophe. Most of us won’t need care on a catastrophic level."
Sir Steve is advocating the introduction of a care pension, which would be a financial product mixing drawdown and care insurance.
However, for the insurance industry to be able to innovate in this space, the government needed to set a cap on social care, he noted.
Steven Cameron, pensions director at Aegon who was also at the hearing, explained insurers could only profit from a product if it becomes something that a lot of people have an interest in purchasing.
He said: "The first thing the government can do is make it really clear what the deal is, how much government and local councils will pay for, and how much individuals will be expected to pay for themselves."
Former prime minister David Cameron had promised to implement a cap on the cost of care of £72,500, which was supposed to come into effect in April 2016.