Could auto-enrolment approach work for Social Care?

A recent Local Government Association report estimated that there will be a funding gap for adult social care services of £3.5 billion by 2025, just to maintain existing standards of care. The inability to pay for a private care home and a shortage of publicly funded social care spaces is also an increasing factor behind hospital bed blocking.[1]

It’s clear that something needs to be done and the government are considering an “opt-out” proposal modelled on the pensions auto-enrolment system. Since it was introduced in 2012, the number of employees with a pension has almost doubled, with 93% of people now paying into one. Following the success of pensions auto-enrolment Matt Hancock, who became Health and Social Care Secretary in July, said he wanted to see people taking more “personal responsibility” for their health and care. In return, a national system would offer individuals more security, removing people’s fears of facing huge costs that can wipe out savings and force them to sell their homes.

England’s current care system means those in residential care face losing all savings and assets down to their last £23,500. Wheels had been put in motion to resolve this by having a cap of £72,000 in lifetime care costs. While these recommendations were well received, plans were dealt a blow when local councils’ raised concerns about affordability. As a result the cap, which had been due to come into force in April 2016 has been scrapped.

The new system would mean contributions will automatically be taken by employers unless the employee asks to opt-out. Employees who stay in could have all their care costs met by the fund or benefit from a cap that means they wouldn’t have to pay over a certain amount. Whereas those who opt-out would be liable for the full costs of their care needs in later life, even if they had to sell their house to do so. 

Why it may not be such a good idea

With an estimated one-in-four needing care in later life, three-in-four may feel they are paying in without getting any benefits.[2] While auto-enrolment is a savings plan, the plans for social care may be more of an insurance contract – with all contributions being pooled to pay for those who need care in the future. There also tends to be a feeling of invincibility around people when they are young and healthy, so opt out rates especially in under 40s could be extremely high.

And finally…

We believe that there’s a massive need for education, starting with the young and continuing throughout our working lives and beyond about the topic of long term care. This education around how to pay for care would make an emotionally difficult time for families at least a little easier. If you’d like to talk to us about paying for care now or planning how you’d do so in the future please don’t hesitate to get in touch on 0800 048 0150. You can also find more information in our factsheet.

 

 

 

[1] Radical pension system-type plans considered to solve social care crisis, www.telegraph.co.uk viewed 17/09/18

[2] Govt floats AE-style funding approach to social care, www.professionaladviser.com, viewed 17/09/18

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