Later Life  

Long-term care and the protection industry

While this takes a huge burden off the social care system, he believes that there needs to be some form of incentive to encourage them to do this. Examples of this could include more flexible working arrangements, or some reciprocal support with care from the local authority to ensure the practice does not affect the informal carer’s health. 

Whatever the proposals put forward, the protection industry is also calling for more clarity around individuals’ financial responsibilities. 

“Insurance should have a role to play in funding future care fees, but without legislation, it is difficult for insurers to look at this issue with any real determination,” says Debbie Kennedy, head of protection at Royal London. 

“This uncertainty means that advisers cannot offer their clients solutions for funding future care costs and, with the issue off the agenda, there is a real risk that those in need of care will simply spend their savings.” 

Her company recently produced some statistics to highlight the potential care fees that individuals could face. These showed that, depending on where they lived, the bill for the average 30-month stay in a residential care was between £50,000 and £93,000. 

 

Current solutions

With so much still to be determined, financial planning around care fees is very much restricted to helping individuals with immediate care needs. As well as structuring a portfolio of savings and investments to provide an income stream to pay future bills, immediate care annuities are another option. 

Also known as care funding plans, these provide a guaranteed income for life, thereby removing the risk that the person lives too long and depletes their savings. Plans are individually underwritten, taking into account factors such as age, health and life expectancy. However, the downside is the market is limited. 

Following the merger of Just Retirement and Partnership, there are only two players – Just and Friends Life – actively promoting these plans.

Unfortunately, there is very little available for individuals wishing to take care of future costs. Although a handful of care fee insurance products were marketed 15 years ago, issues matching equity returns to rising care costs meant they were shelved. 

 

Care options

More recently, a few insurers have acknowledged that the cost of care is an issue for many customers, adding care elements to their whole of life plans. For example, Vitality Life offers lifestyle care cover as an option on its whole-of-life plan.

This pays out up to £250,000 if the policyholder is diagnosed with a degenerative illness such as dementia, Alzheimer’s, Parkinson’s or a stroke, which means they are no longer able to live independently. Payments are based on the severity of the condition, with two levels available giving either the full sum insured or a 20 per cent payout.