The elephant in the room with its beeping life support machine
By Owen Walker - 18th February 2010You know you are nearing a general election when political rhetoric goes Star Wars. When it was revealed the government was looking at how different ways of funding long-term care would play with voters, the Tories were quick to accuse it of plotting a death tax.
The proposal which brought the biggest derision was for a £20,000 tax charged on estates after death. Another suggestion was for a universal 10% tax. The Conservative response was a series of billboard adverts, telling voters to be wary of the great Labour “R.I.P. off” (geddit?).
Shadow health secretary Andrew Lansley warned: “Behind closed doors ministers are secretly planning a death tax of up to £20,000 per head which would be levied on the estates of grieving families.”
According to the Daily Mail, Lansley’s opposite number, Andy Burnham, accused his counterpart of having “bloody shafted” him.
But while point scoring and scaremongering can be fun, it is distracting from the 80-year-old elephant in the room and its beeping life-support machine.
The increasing cost of keeping our ageing population alive is stark. Future projections of the UK’s care bill vary between £670m and £1bn a year.
The Conservative proposal is for a voluntary £8,000 contribution which would go to fund residential care.
But the crux of the problem is that the vast majority of the electorate do not want to pay higher taxes, though expect the state to provide them – literally from the cradle to the grave.
Currently, those with assets of £23,000 or less can expect to have their care bills wholly covered by the state, but ownership of even a modest property can comfortably push many above this level.
While politicians and policy wonks must come up with a workable, fair solution to ensure those with means contribute to their own care bills, providers have already come up with a range of products to help fill the gap.
LV has become the second entrant into the fixed-term annuity market, previously solely occupied by Living Time. These products do not tie the purchaser to a lifetime commitment. If an annuitant’s circumstances change (such as deteriorating health conditions) they can adapt their income stream to their needs.
The March issue of Pensions Management features a survey of the equity release market and how retirees are able to access the capital tied up in their homes.
But the key to successfully tackling the costs of long-term care is convincing the electorate that they are going to have to foot the bill – either through increased taxes or private savings. Perhaps both. Political infighting only serves to muddle the message.