Where is the money going to come from to pay for elderly care?

The cost of elderly care is spiralling out of control

Questions we need to ask ourselves, include:

Perhaps your parents can sell their house, right?

It is now 13 years since Tony Blair said that he did not want children brought up in a country "where the only way pensioners can get long-term care is by selling their home".

Since this statement, more than 48,000 pensioners are now living in residential care homes who were forced to sell their homes to pay for elderly care bills.

Perhaps the children of older people should make a contribution?

It may well come to that, that you, as their child(ren) – in many cases affluent children – will be means-tested and assessed for a compulsory contribution, in much the same way as the elderly themselves are asked to make a contribution.

Perhaps the tax payer should pay for elderly care?

During a conference organised by Age UK, in March 2010, former Labor Health Secretary Andy Burnham disclosed that he favoured a "comprehensive, compulsory" scheme to replace a system that forces many to sell their homes to pay for elderly care and fund nursing home bills.

Burnham wanted to introduce the new scheme to pay for a new "national care service" on the lines of the National Health Service that could take one of three forms (or a mixture thereof):

  1. people could decide to defer retirement to 68 and use their pension contributions for three years to pay into the National Care Service,
  2. people could pay in instalments in the run-up to retiring at 65, or
  3. a 10 per cent new tax -estate levy- on people’s estates after their death – the so-called death tax.

White Paper On Social Care

By the end of April, 2010, a White Paper was published –Building the National Care Service- which aims to extend the principles of the NHS to care for the elderly. The White Paper reforms are in three stages:

  • the first stage involves providing free care at home for 400,000 elderly and infirm with critical needs,
  • followed by a ‘guarantee’, by 2014 that residential carewill be free after the first two years, and finally
  • “some kind of consensus” on how people should provide personal contributions.

Three person committee enquiry

Post elections, this was followed with the appointment of a three-person commission chaired by economist Andrew Dilnot and tasked with recommending to the Health Secretary a new system for funding long term care and support for elderly and disabled adults.

The inquiry is due to report in July but it appears that no single solution exists, with individuals, taxpayers and family members all certain to share the burden.

A New ‘Death Tax’ – Not In My Lifetime!

Burnham told the conference that the estate levy would be "progressive", so that a millionaire would pay more than the ordinary pensioner. Tory health spokesman Andrew Lansley has rejected the idee of a progressive levy to force people to pay "death taxes".

The suggested "death tax" would mean that ultimately all care was funded by the state, paid for via a new universal tax on all estates.

Of course this would be in addition to inheritance tax!

My five pence's . . .

I believe that individuals and their loved ones are best placed to decide what sort of care is best for them, their parents and grandparents.

Pre last years' elections, the Conservatives favoured a voluntary insurance scheme with an £8,000 premium which will enable people to protect everything that they've worked and saved for all their life.

That seem to be fair to me.

The Tory proposals mean that no one is forced to sell their home to pay for their long-term care –something that Tony Blair promised to end 13 years ago.

More specifically, this also means that:

  1. individuals and families are looking out for those nearest to them,
  2. everyone has a contribution to make to the costs of care of the elderly, and
  3. it encourages also that people take more control over their lives.

What Does All This Mean To You?

I have no short or clear cut answer to this. But it is clear to me that the current welfare state will have to change. The pension and health care system as we know it today will most likely have to disappear as we simply cannot afford them any longer.

As an individual you need to make sure that you are well prepared for what’s heading your direction and that you are able to withstand the tumultuous times ahead of you if you are going to pay for elderly care and want to Retire Early and Rich.

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