Leaving aside the politics, can private insurance help to solve the problem of looking after the elderly? Jason Hurley puts the case.
For example, the role of the private sector in equity release has now become even less clear, and it is to be hoped that joined-up thinking ensures that individuals participating in the proposed government administered scheme to fund their care are able to unlock their remaining property wealth for alternative uses – whether that be retirement income or other needs.
Those with income in retirement
The lucky ones! This segment has the resources to buy private solutions, and they can benefit from the risk pooling that many insurance products offer, whether they be immediate needs annuities, standard annuities or disability linked annuities, equity release, drawdown or a raft of other options.
This segment will need specialist advice, and is already attracting many advisers looking at decumulation solutions. The baby boomers are looking at solutions now, and this demographic hump is offering plenty of opportunities.
Those with income pre-retirement
This is the most interesting group and the one which is often overlooked, but where the potential for progress is greatest. Many in this segment have the potential to make their own private provision if there is an appropriate framework in place, namely:
- An awareness of the issue;
- Products that are simple, affordable, and offer good value for money and strong TCF values;
- Where the regulations allow a benefit to save, such as where tax benefits can be obtained and there are no saving disincentives. Such people could, and probably should, make provision using their pension contributions as a foundation. These could be funded by both the employer and employee, and should be linked to the state pension.
This is a strong proposition for the customer:
- People need to be aware that this is a problem and that they should take some responsibility to make provision for themselves;
- If the long-term savings benefit from the tax-efficient nature of pension fund contributions, then they will benefit from tax relief on the contribution and the gross roll-up of the contributions and;
- When people come to retire, their savings will offer them a choice of many products, ranging from drawdown, standard and underwritten annuities, ‘long-term care annuities’, ‘long-term care annuity plus’, or a combination of these products.
