Personal finance: More problems for the caring society

Plans to make long term care more accessible will still leave many in tough straits. By Clifford German

THE ROYAL Commission on Long Term Care has apparently come up with a plan to protect old people from seeing their life savings swallowed up to pay for long-term care, but like most modern solutions to current problems it is not a comprehensive solution.

If the leaks last week are to be believed the commission will recommend that the taxpayer should pay for nursing and social care for all old people who need it, whether they are still living at home or need to go into a nursing home, and regardless of how much money they have.

The exact definition of nursing and social care is still open for debate. Should it include home helps as a matter of course, and free chiropody, for example, as Age Concern would like? But it seems certain that people in nursing homes would still have to pay for board and lodging if they can afford to do so. People who go into a residential home which provides little or no nursing care would also still have to pay, if they can afford it, and they may well get little or no benefit from the proposed reforms.

But making the taxpayer responsible for nursing care could save the 150,000 residents of nursing homes an average of pounds 5,000 a year, and at least guarantee the 250,000 people currently in residential homes that their bills will not leap if they need nursing care.

The cost of care varies from place to place and is significantly higher in south east England than elsewhere, but according to Age Concern the average cost of a place in a nursing home is pounds 17,500 a year, while the average residential home cost is about pounds 12,500 a year, which gives a measure of the money involved in implementing the report.

It will also recommend that the point at which pensioners' assets have been reduced, and the state steps in to pay some of the costs of care, should be raised again from pounds 16,000 to pounds 40,000, and the level where all needs are paid for by the taxpayer should also be raised from pounds 10,000 to around pounds 24,000. It would still not be high enough to prevent many old people from having to sell the family home to pay for residential care, but it would still leave them with a bigger nest egg to leave to their children.

There is no sign that the commission has adopted the principle of shared responsibility favoured by many private insurance companies, under which old people of moderate means would be expected to take out insurance policies to pay their own costs for up to four years in a home, after which the state would take over full responsibility.

But companies like Norwich Union, which currently sell long term care insurance policies to help old people pay for care without having to run their assets right down, are likely to welcome the proposals because they cap the maximum amount old people would have to pay for care, and therefore reduce the premiums and make the policies cheaper and easier to sell. Existing policy-holders who had over-insured would still be able to claim on policies to pay for care in more expensive homes.

The report would not provide instant relief for existing residents and pensioners who face the prospect of needing care in the near future. It would probably take three years to implement the reforms and provide protection for existing residents in homes. Whether it would be enough to persuade the current generation of working people to take out insurance for something they may not need, remains to be seen. At present only one in five men need to go into a home, and one in three women - but the odds do shrink rapidly with age.