A review proposing a radical overhaul of how UK elderly care is funded has called for the financial services industry to help people cover the costs of their contributions.
Economist Andrew Dilnot has called for the current system of means testing, which forces people with more than £23,250 in assets to fund their care in full, to be changed to prevent people losing their life savings to pay for care.
Dilnot has proposed that care costs to each person be capped at between £30,000 and £50,000, after which the government would provide care for free, and threw open the field to financial services providers to help people cover that contribution.
At present, one person in ten has to pay more than £100,000 in care fees, usually by selling their house, as a result of the unlimited liability rules.
Dilnot emphasised that by specifying a clear limit for individual contributions, it would allow banks and insurers to develop products that would fund it.
He argued that although a proposed £35,000 cap would cost the government a total £1.7bn, the investment would create an opportunity to include private funding.
“BY spending this extra money, we believe that a new space is created for the financial services sector, and people will be encouraged to properly fund their care and invest resources earlier in their care journey,” he said in a letter to the chancellor.
The Association of British Insurers said it agreed with the essence of the recommendations.
“We need a clear and sustainable framework to work from, so insurers can help to establish a functioning market, and individuals and the state can work in partnership, to determine an affordable and permanent solution for the funding of long-term care. The insurance industry stands ready to support this,” said ABI chairman Tim Breedon.