How pensions can help meet consumer needs under the new Social Care regime

Long term care (LTC) has long been a topic of political debate in England. The Commission on Funding of Care and Support (widely known as The Dilnot Commission) was established in July 2010 and tasked by Government with reviewing the funding system for care and support in England. The recommendations made by The Dilnot Commission in July 2011 have since been updated to form the current Care Bill (2013-14) progressing through Parliament. The Government has recently been consulting with various stakeholders, including the financial services industry, on the anticipated changes to LTC that could result from the Care Bill (2013-14) becoming law. In particular, the Government has been seeking input from the financial services industry on what financial products may be developed to enable individuals to provide for their LTC needs in later life under the new regime. The Institute and Faculty of Actuaries (IFoA) Royal Charter states that the objects of the IFoA shall be, in the public interest, to advance all matters relevant to actuarial science and its application to regulate and promote the actuarial profession. The IFoA, as an independent professional body, has
sought to inform the debate by providing Government with an independent expert view, formed from its members who are specialists in both pensions and LTC. This paper has been written by the IFoA’s Pensions and Long Term Care Working Party’s Products Research Group and considers how pensions might be used to help fund LTC needs at older ages. In particular, how pension wealth and uses of pension or pension based products could fund LTC needs in the new regime from 2016. This paper also considers the financial impact of the proposed cost cap for individuals in England. Other IFoA members are providing views on how non-pension products could be used (e.g. equity release) and other groups within the IFoA are considering the impact of care costs on individuals and on building an understanding of the distribution of pension wealth.