The government, which is working on a green paper on social care, has already said the future model of social care won’t be solely funded by taxpayers.
It is estimated just 12 per cent of adults aged 55 or over are currently putting aside money to pay for social care later in life.
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.
But in 2015 the government pushed this back to 2020, because it would have added £6bn to public sector spending at a "time of consolidation".
In December the government confirmed the proposed cap would be scrapped while a green paper on long-term reform was put together.
The publication of this paper was originally expected in the summer but has since been pushed back to the autumn, and the government has since hinted the publication could be delayed further due to "unforeseen circumstances".
Several solutions for the care funding problem are said to be on the table, including the ‘Care Isa’ – a capped savings product, exempt from inheritance tax – and a 'care pension', which mixes drawdown and care insurance.
Steven Cameron, pensions director at Aegon, said the IFoA was right to highlight the current disincentives to save towards the cost of care.
He said: "As part of the long overdue green paper on social care funding, the government needs to set out a new deal on what it will pay and what individuals will be expected to pay, based on their wealth. Individuals should be positively incentivised to set aside their share of possible future care costs.
"We believe a fundamental part of any new deal must be an overall cap on how much an individual will ever have to pay towards their care costs. This may be separate from any ‘room and board’ charge. This will allow individuals to plan ahead for care costs while protecting inheritance aspirations."
maria.espadinha@ft.com
