Retirement Income 

Incentives needed to spur saving for social care, says PPI

Incentives needed to spur saving for social care, says PPI

The Pensions Policy Institute is calling for government to introduce incentives to encourage people to save for social care as nine in 10 over-65s have no plans in place.

Research from the PPI and Association of British Insurers has revealed that out of 2,093 individuals, 89 per cent of over-65s have made no plans to pay for social care despite around half of all care users having to self-pay in some way.

It also found 51 per cent of people saw the state pension as the most likely source of funding to pay for care, with only 17 per cent saying insurance could play a role and 26 per cent of individuals willing to sell their home.

One third of the population could benefit from targeted government incentives, such as tax exemptions, the analysis revealed. 

Due to this, the ABI is now calling on the government to urgently publish the social care green paper and consider how to target interventions for self-funders to help solve the social care funding crisis.

The ABI said a "massive new campaign" was needed to raise awareness of social care funding and new incentives should be considered to encourage people to make provision to pay for care in the future.

The publication of the green paper was originally expected in the summer but has faced several delays, with the government saying it will become public "in due course".

The PPI has proposed a target group for incentives which would include people who have savings of more than the means test threshold (£23,250) but less than £200,000.

This group makes up approximately 37 per cent of people in England aged over-50.

According to the research, within this target group, 90 per cent of those aged 65-79 own their home outright, and half of these have over £300,000 in housing wealth. 

Among those aged 60 to 64 in the target market, a quarter have more than £230,000 in pension wealth, which is likely to increase in future. 

Therefore, many of the next generation who need care will have to use housing wealth to pay for it, but pension savings can play an increasing part in the longer term, stated the PPI.

Yvonne Braun, director of policy, long-term savings and protection at the ABI, said: “The social care system and how it is funded desperately needs an overhaul. People simply aren’t preparing to pay for their care costs and this needs to change. 

"The government urgently needs to publish the promised green paper and take important decisions on the future of care funding.”

Rachael Griffin, tax and financial planning expert at Quilter has also called for the government to release the green paper sooner rather than later.

She said: “This paper is something of a mythical creature as it has constantly been promised and never appeared. 

“We can’t forget that it’s just the first stage in a long process towards shifting policy and finding a solution. There will need to be a consultation and a white paper and that’s all before we actually implement a timeframe to have a new system up and running."