"We need to ensure that incentives are in place for people to plan ahead for an event which could be 20 or more years into the future."
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.
As part of the Centre for Policy Studies’ social care funding review, published on April 29, MP Damien Green suggested that people should be able to purchase a care supplement, which would be similar to an annuity or insurance policy, to ensure individuals have funds for more expensive care if needed in the future.
This money would come from individuals’ existing pension pots, lifetime savings or via equity withdrawal from people’s homes and would act as a top up to government funded state care.
Mr Green said: "The individuals who are now reaching the age of 60 are the generation who have a huge amount of housing wealth. These people are worried about having to sell their home in order to pay for their care in later life.
"The care supplement is designed to address these fears by giving individuals the option to give up only a small part of their housing wealth and in return they get peace of mind that they will receive top of the range social care. They will also have the rest of their housing wealth to leave as inheritance, which is an attractive offer to this age group."
What do you think about the issues raised by this story? Email us on email@example.com to let us know