Axa urges industry to create LTC savings vehicle

The pensions and insurance industry must create a long term care (LTC) savings vehicle separate to other products to tackle the problem of growing care needs amongst the elderly, Axa said.

The Office for Budget Responsibility's (OBR) Fiscal Sustainability Report yesterday claimed the cost of caring for the ageing population, through state pensions, social care and health spending, will rise from 36.3% of GDP in 2016 to 41.7% by 2061.

Taxes must rise or spending in other areas must be slashed to meet these spending needs, the OBR said.

However, questions are arising over how feasible such spending will be.

Mike Morrison, head of pensions development at Axa Wealth, said: "The industry must develop new product innovations to support the needs of those in later life.

"We should support people in creating a fund which exclusively exists to fund LTC.

"There should be an allowance in addition to the annual pension contribution, which would also be tax efficient. These savings can serve to support individuals' costs in later life," said Morrison, pictured.

Morrison's call echoes that made by MetLife product marketing director Peter Carter last week, when he called for legislation to allow investors to hold deferred annuities within their drawdown pots to help pay for LTC later in life.

Darren Philp, director of policy at the National Association of Pension Funds (NAPF), said the OBR report pointed further to the shifting of the burden of paying for care in later life from the state to the individual.

"To enjoy a decent retirement, people also need to take more responsibility for their old age by starting to save adequately for their retirement from as early as possible," said Philp.