State and financial services can work in partnership to solve the long-term care funding crisis confronting England and Wales, according to a new report.
The Delivering a National Care Fund study from think tank Strategic Society Centre proposes a model built around a state-sponsored insurance scheme administered and underwritten by the financial services industry.
It proposes that for a £6825 premium from retirees, or £14 per month over a 40-year working career, retirees who are no longer able to undertake three or more activities of daily living (ADLs) would receive a benchmark income of £150 per week for the rest of their life.
This equates to £7,800 per year.
Market analysts Laing & Buisson estimated that in 2010 the average annual cost of a care home bed was £35,984.
It builds upon the model of a National Care Fund for long-term care, first proposed by James Lloyd, the report's author, in 2008 and consists of two core components:
- An accumulation/investment regime would see asset managers operating large social investment funds on behalf of the National Care Fund;
- The annual profits + notional contributions from these funds would be used to purchase community-risk rated annuities for all individuals reaching the three ADL threshold of need in a given year.
The report explained the claims threshold of three ADL failures is roughly equivalent to a Substantial level of need under the current Fair Access to Care Services criteria used by local authorities.
"Setting the claims threshold at this level is reasonable given that many households can cope with Low and Moderate levels of need through the provision of informal care, and through formal care purchased from private resources," it continued.
"Many individuals with one or two ADL failures will be able to claim Attendance Allowance, which is worth £71.40 at the higher rate and £47.80 at the lower rate.
"This is also the needs-threshold applied in the Singaporean Eldershield state-sponsored insurance scheme."
In all it estimated a National Care Fund would receive 250,000 new claims each year.
James Lloyd, director of the Strategic Society Centre, said: "The model we are proposing will make big demands on the financial services industry; in particular, it would see the number of life annuities written each year increasing by over 50%.
"But, we have consulted widely, and there is nothing in this model that the industry would not be able to do. We have even had word from some key life insurance players that they would be interested in participating."
"It is an open secret in the insurance industry that the pre-funded long-term care insurance market will never be significant, but there is an appetite for helping to find a solution to the problem of long-term care funding.
"The model we are putting forward provides a way for industry stakeholders to do this," he added.
