A radical automatic enrolment-style scheme for over 40s could help fund social care, former pensions minister Sir Steve Webb has suggested.
Webb, now a partner at consultancy Lane Clark and Peacock, has co-authored a report looking into how the UK could tackle the social care funding challenge.
The proposal would see all taxpayers aged 40 or over – including pensioners – automatically enrolled into paying a social care premium equivalent to 1p on the basic rate of income tax.
The maximum premium would be just over £30 per month, with the option to opt out.
According to the report, those who remained in the scheme would build up a discount on their future social care costs, such that those who paid in over a 25-year period would be entitled to entirely free personal social care.
Webb said discounts would start as soon as people had paid into the scheme for one year, receiving a 4% discount, while those with two years would get an 8% discount and so forth.
The solution seeks to mimic the highly successful automatic enrolment into workplace pensions, which has brought more than 11 million people into pension saving since 2012.
LCP said that the proposed scheme would allow people to pool their risk of facing ’catastrophic’ care costs, with one in seven people expected to spend more than £100,000 on care costs over their lifetime. The consultancy said a big advantage of the scheme is that it generates substantial upfront revenue for the government, with costs rising much more slowly.
Steve Webb, partner at LCP, said: “At present, people are at risk of having their life savings wiped out by catastrophic care costs, and have no way of pooling this risk with other people. This scheme, with an opt-out for those who don’t want it, provides an affordable and efficient way for people to protect their savings.”
Up front funds could be used in various ways, LCP argues, including a relaxation of the capital rules, which currently mean that people in England cannot get any help with their care costs if they have assets of more than £23,250. The report suggests that this cut-off should be immediately raised to £100,000.
Furthermore, funds could be put towards interventions that help people living with care needs at home, including falls prevention, home adaptations and better support for unpaid carers.
Finally, the report said it could form part of the introduction of a national care service, providing additional revenue without the need for controversial new taxes. This could help bridge the gap between the savings from the recently announced changes to the State Pension triple lock and the much larger cost of the Prime Minister’s plans for free social care.
Dr Jonathan Pearson-Stuttard, report co-author and head of health at LCP, commented: “Our proposed economic framework would not only help people better meet the costs of care but also generate early funding to invest in keeping people healthier and independent for longer.
“Shifting our focus from treating illness to preventing it can strengthen communities, ease pressure on public services and support the health-driven prosperity on which a stronger economy depends.”
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