Stephen Lowe, Group Communications Director at retirement specialist Just Group, explores whether homeowners should be expected to use their property wealth to fund later life care — or if this approach threatens the fairness of how we fund care for an aging society.
There’s no shortage of views on how care in later life should be funded and the role of property. I’m going to share what the public have to say on the matter. You may be surprised.
Soon after Andrew Dilnot delivered the Fairer Care Funding report to government in 2011, we started researching how the over-45s think and feel about the care system for our annual Care Report, now in its 12th edition.
Expecting people to sell homes to pay for care may be political kryptonite, but it turns out that the public’s view is nuanced on whether it is fair or acceptable. When asked how they might pay if they needed to go into residential care, 42% of age 45+ homeowners said they would sell their home, more than those who said they would use pension (30%) or savings income (36%). A further 5% said they would rent their house out. Very few (14%) thought that the State would pay.
Eight in 10 (79%) believed it true that people can be forced to sell their home to pay for care. Although technically not correct – loans from local authorities can defer the sale until after death – practically speaking, selling is the reality for thousands of families each year. Among over-45s who had helped loved ones find care, 40% said it was being funded in some way by the sale of the home.
Using property wealth is already a fact of life. But is it fair? Just under half (44%) of homeowners aged 45+ thought it unfair to use the value of a property to pay for care. An almost equal proportion (43%) thought it was fair they should have to use some of the home value, and 11% thought it fair to use all of its value.
Many accept they have a responsibility to use their own wealth to look after themselves in future, rather than expecting others to pay. They welcome the control it gives over the quality of care they would receive. However, they feel frustrated. They see the ‘care crisis’ unfolding and lack of political action. They worry care is a lottery – the lucky ones never pay a penny while the unlucky ones get financially hammered. They are concerned the State is not paying its fair share, leaving them to subsidise the shortfall.
Above all, they think it’s pointless planning because the problem is too big and the rules are likely to change. Three-quarters (74%) of over-45s and two-thirds (68%) of over-75s said they had never thought about care, planned for it, or spoken to family about it.
This year was set to see the introduction of a cap on personal care costs of £86,000, a plan scrapped post-election by the Labour government. While not a perfect policy, it had merits. A cap would have given people a realistic target to plan for and work towards. Andrew Dilnot believed care costs remained “the last big unpooled risk” people face and that the cap would make private care policies viable and stimulate financial innovation. It was also popular with more than half (51%) of over-45s supporting the idea.
Care funding has to come from somewhere. Among those over-45s with household incomes of more than £50,000 a year – the likely self-funders of the future – more than four in 10 (42%) expressed interest in making a financial commitment now if the government offered a financial incentive. A quarter (26%) said they would be prepared to pledge some of their property value. It’s a possibility worth exploring.
At a time of urgent need for more money in the care sector, there are trillions in property wealth held by retired people. Whilst not a universal solution, for the foreseeable future that is going to be the only practical funding source for care for the majority of people. The challenge is to make sure that wealth is used efficiently and not frittered away, for the house to become a financial powerhouse that is the basis of a better retirement.
