Act to action
New care reforms are only part of the solution to better planning for later life.
You will probably know an elderly family member or friend who receives care, or you may care for someone yourself. Although it’s not something most of us like to dwell on, many of us will need to rely on care and support services as we get older. In fact, the Association of British Insurers estimates that one in three of us will come to rely on some form of care at some point in our lives1.
Amid the steady growth of the UK’s aged population in recent decades, the existing care system has been held to be too complex. However, new legislation that starts to come into effect in April will simplify the current system that has been in place for more than 60 years. At its heart is the desire to improve advice, which an earlier white paper identified as the root cause of many problems in the past.
The Care Act 2014, among other things, will place the responsibility on local authorities to provide information and education on care provision. Tony Müdd, Divisional Director at St. James’s Place, explains: “If you have a care need under the new system, councils will have to provide information on how that care can be provided; and offer advice to help you or your support network understand what assistance you’ll need, both practical and financial.”
Much of the information provided by councils will be on how to access free and fee-based advice, says Müdd. Councils will have to explain the benefits of taking financial advice; and how this can be accessed when it would not be appropriate for the local authority to provide it itself. Although local authorities will be able to provide unregulated advice, few authorities, if any, will be able to provide advice that is regulated.
Although the legislation should ensure a range of care advice and information for everyone, Müdd cautions that it’s far from a panacea. “The new responsibilities for councils should not reduce the need for people to seek regulated advice from their adviser,” he continues. “Indeed, it would be difficult to imagine people planning for long-term care properly without referring to financial advisers who are trained in advising on care in later life and can make specific product recommendations.”
Local authorities will also be required to identify as early as possible those who might benefit from financial advice. “People will have the opportunity to engage with long-term care issues much earlier in life, when they are in the best position to plan financially,” he adds. “Often, care decisions are made at times of upheaval, so planning early can help you make those difficult decisions at the point of need.” For example planning ahead can help identify required modifications to, or extra support needed in, the home and improve the chances of maintaining independence.
Certainly, planning for care funding isn’t normally the first thing on people’s minds when they portion out available income, especially when one considers the needs of short-term savings, pension contributions, mortgage payments and school fees. “The purchase of some form of long-term care product probably comes a long way down, if not at the bottom of, the list for most people,” he adds.
Accordingly, the development of affordable care solutions is as crucial as the legislation itself, says Müdd. The government also views new financial products as an essential element of long-term care provision. For example, whole-of-life insurance policies could cover the cost of care and life assurance. Pensions are another natural fit with long-term care; with the recent changes to annuity rules, products could be developed that raise income levels in the event of the annuitant going into care. “This is arguably the biggest win of all,” he says.
1 Source: www.abi.org.uk - 13 February 2013
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