Care: Financial Services Industry

Baroness Greengross Excerpts

Wednesday 26th February 2014 Lords Chamber

[Baroness Greengross (CB)]

My Lords, I add my congratulations to the noble Lord, Lord Lipsey, on securing this debate and pointing out so much that still needs to be done to fulfil the potential of the Dilnot recommendations. While we all regret the fact that it does not seem that long-term care products will be available for some time—perhaps that was predictable and perhaps we all knew that—we have been encouraged by the Government’s decision in its Care Bill largely to accept the Dilnot commission recommendations for a cap to be created for an individual’s lifetime contributions towards their social care costs. That represents an important starting point from which new care funding solutions can begin to emerge.

An important outcome from those reforms for the industry would be the long-term stability and sustainability of the social care funding framework. A stable state framework should give consumers the confidence to invest in solutions to pay for their share of care costs. It will also have a positive impact on providers’ willingness to enter the market. However, much of the detail around the operation of the cap, in particular the modus operandi of the benefit eligibility criteria, as the noble Lord, Lord Lipsey pointed out, will be clear only when the promised guidance finally emerges from the Department of Health. It would be helpful if we had a better idea about the timetable for the appearance of that guidance.

The legislation itself will not deliver a new care funding option unless it first creates the right environment in which new markets for care funding products can develop. Accordingly, I warmly welcome the new statement of intent between the Association of British Insurers and the Government. That is an important step in the process of helping people to plan and prepare for the costs of long-term care. From my perspective, an important element of that statement is the declaration that there will be a joint initiative to raise public awareness of the reforms in advance of 2015. In the absence of such an effective information and education campaign, possibly run in conjunction with a campaign on pensions awareness, low consumer understanding about the realities of care funding—as the noble Baroness, Lady Brinton, pointed out—will continue to reduce the demand for new care funding options, which the financial services industry could potentially develop products to meet.

Currently, for those who can afford them, immediate needs annuities are the only products dedicated to care fees funding. These guarantee an income for life to fund care costs in return for a one-off premium. In the continued absence of any form of pre-funded long-term care insurance products, it is to be hoped that products such as disability-linked annuities and vehicles that combined care insurance with other protection insurance options—the so-called care conversion and hybrid protection products—will emerge. We should do all we can to encourage such innovations.

Unless local authorities, as part of their mandate to establish a competent local information service, have effective processes in place to refer future consumers—who are already emerging and may require appropriate regulated financial advice—perhaps to members of SOLLA, who are reliable and can give them the correct information, not only will the information programme be wasted but many consumers will not get the outcome their sensible considerations and planning merit. Some reassurance from the Minister on both the information programme and service would be helpful. I hope that he can give that assurance to us.

For people with property assets, one of the routes to funding care fees that emerges may be based on the current equity release products, as we have heard. For example, only yesterday the think tank Demos launched a research report which explored the possibility of helping customers to ring-fence a proportion of their housing equity to help them to meet their long-term care costs in later life. It is also important to remember that, while the proposed extension of local authority deferred payment schemes is positive, these are complex financial arrangements with long-term consequences. In many ways they are very similar to fully FCA-regulated equity release products but without the accompanying consumer protection and redress features.

Therefore, first, an information and advice campaign must be aligned with that on pensions; secondly, the guidelines should be consulted upon, and eligibility criteria and the level of need should be thought about again—it is really important that we build in some protection for people—and, thirdly, eligibility criteria should, I think, be national rather than local so that minimum standards are guaranteed and could be exceeded locally but not lowered.

The older population has within it people of all different shapes and sizes with different aspirations and needs, and a one-size-fits-all solution is inappropriate. I end by echoing the aspirations of the statement of intent, in that all of us must continue to work together to help people to better plan, better prepare and better save for care costs. We must spare no effort in seeking to identify the best care funding solutions for all our different people of all ages and backgrounds.