Documente Academic
Documente Profesional
Documente Cultură
Topic:
Steven Graham
Ailsa Dunn
Rebecca Deegan
Jerry Barnfield
Catherine Burtle
Ben Rickayzen
Audrey Teow
Linda Daly
Jesse Haines
Padraig OMaille
Wendy Beaver
No
Qualifies
State support received for
funding care
7
The State
Aware of the need for
reform but reluctant to make
irreversible decisions on
social care
Government spending cuts
likely to impact
Insurance companies
Uncertainty about future
Government decisions
Reticent about devoting
time & money
A Complicated System
Costs met by
individual
Costs met by
local authority
Total care
costs of 30k
- 50k+ p.a.
Daily living
costs in Local
Authority rate
of 12k p.a.
Local
authority rate
(excl daily
living) 18k 28k p.a.
Case Study
Example - Mary
enters a care home costing 42,984 p.a. comprising:
32,649 p.a. Local Authority set care costs (of which 12,000 p.a. are daily
living costs which dont count towards care cap)
10,335 p.a. additional top up costs
pension income of
21,000 p.a. (State
Pension, Private
Pension, NHS-funded
Allowance and
Attendance Allowance)
Home is owned
and valued at
200,000
45,000
40,000
35,000
Excess over
Local Authority Rate
Top Up Payment
Savings
30,000
25,000
Savings
Local Authority
Contribution
20,000
Private Pension
Private Pension
15,000
NHS-funded Allowance
NHS-funded Allowance
Private Pension
Attendance Allowance
Attendance Allowance
NHS-funded Allowance
State Pension
State Pension
State Pension
Funding in Year 1
Funding in Year 2
10,000
5,000
0
50,000
40,000
30,000
Excess over
Local Authority
Rate
Savings
Daily Living
Costs
20,000
10,000
Local Authority
Rate
{excl Daily
Living Costs)
Deferred
Payment
Option
(DPO)
Deferred
Payment
Option
(DPO)
Savings run
out in Year 2
Local Authority
Contribution
Deferred
Payment
Option
(DPO)
Local Authority
Contribution
Private Pension
NHS-funded
Allowance
Attendance
Allowance (AA)
Private Pension
NHS-funded
Allowance
Attendance
Allowance (AA)
Private Pension
NHS-funded
Allowance
Attendance
Allowance (AA)
Private Pension
NHS-funded
Allowance
AA
Private Pension
NHS-funded
Allowance
State Pension
State Pension
State Pension
State Pension
State Pension
Funding in
Year 1
Funding in
Year 2
Funding in Year 3
Funding in Year 4
Funding in Year 5
and thereafter
DPO
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Outstanding
Loan
Outstanding
Loan
Outstanding
Loan
Outstanding
Loan
25
Probability (%)
20
Males
Females
15
14
11
10
8
5
7
4
75
85
Age at Entry into Care Home with Nursing
95
20
2,25,000
2,00,000
20
1,75,000
17
17
1,50,000
15
10
Probability of
reaching the cap
(%)
13
12
1,00,000
10
8
5.9
7
6.3
6.6
6
5.5
East
Midlands
1,25,000
6.0
West
Midlands
75,000
4.7
East of
England
4.0
London
3.5
4.0
Years before
cap is reached
50,000
4.9
England
25,000
25
21
Incentive to save
one of the major challenges to address is the incentive to save
for potential future care costs
a major reason why individuals save for LTC needs is so they
can influence the type or quality of care they receive
our model demonstrates that the current means testing
approach is a disincentive to saving
Care Act 2014 is an improvement
further changes should be considered
12,000
10,000
8,000
6,000
4,000
2,000
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
LTC Products
26
27
Equity release
Commonly in the form of lifetime mortgage
Homeowner receives lump sum in return for charge against
property
Loan (plus interest) repaid on sale of home
Individual lives in property until death or entry to care home
Usually a guarantee that loan repaid % of sale proceeds
28
Variable
annuities
Income
drawdown
Equity
release
variations
Disabilitylinked annuity
Prefunded
protection
29
Disability-linked annuity
Pays standard annuity while policyholder in good health
- but much higher level(s) should LTC be required
Greater access to pension lump sum could make DLA more
affordable
Could be more interest in DLA which pays nothing while
individual in good health?
30
Disability linked
annuity
Immediate needs
annuity
Accelerated WoL
Variable annuity
Care ISA
Current care
needs?
Yes
Want to
protect
against
longevity
risk?
No
Yes
Accelerated
Whole of Life
(WoL)
Variable annuity
Protection
Care ISA
No
Yes
Yes
No
Products in black are pension products , white are non-pension products and red can be both
No
Conclusions
1. It is still too early to understand exactly how individuals will
respond to the pensions freedom and choice agenda
2. The care funding system is very difficult for people to
understand - the proposed changes in 2020 make it even
more complicated
3. The current means testing system can cause a disincentive to
save with an effective tax rate of over 100% for some
people!
Questions
Comments
The views expressed in this presentation are those of invited contributors and not necessarily those of the IFoA. The IFoA do not
endorse any of the views stated, nor any claims or representations made in this presentation and accept no responsibility or liability
to any person for loss or damage suffered as a consequence of their placing reliance upon any view, claim or representation made
in this presentation.
The information and expressions of opinion contained in this publication are not intended to be a comprehensive study, nor to
provide actuarial advice or advice of any nature and should not be treated as a substitute for specific advice concerning individual
situations. On no account may any part of this presentation be reproduced without the written permission of the IFoA .
33