Inquiry: How can we simplify long-term care?

Helen Morrissey asks what needs to be done to simplify the care system.

The funding of long-term care is a major issue for policy makers and local authorities concerned about our ageing population's ability to pay for this service.

But despite these legitimate worries, it is not an area widely discussed by the population at large. People don't think or do not want to think it will happen to them and so don't prepare for it.

Similarly, it is not an area many advisers choose to specialise in and so people's questions often go unanswered. Indeed, it is only when people find themselves at the point of need that they even consider getting more information but then find that they don't know where to go to get information or advice.

In this Retirement Planner Inquiry, we asked advisers to give us their opinions about the long-term care market and whether anything can be done to improve people's experience. We sent out a questionnaire via email, with 132 advisers starting the survey.

A low priority

The first question we asked the advisers was how much of their business came from long-term care. A massive 75% said between 1-10% of their business was in this area, with a further 8% saying it accounted for between 11-25% of business.

Six per cent said long-term care advice accounted for between 26-50% of their business, while 4% said it stood for between 51-75% of business. Seven per cent of participants said long-term care advice accounted for 76-100% of their overall business.

We then asked advisers about the main challenges they face when advising in this area. There were many obstacles, with 69% of advisers saying that clients lacked knowledge about the options available to them.

Almost half (48%) said there was a lack of appropriate products on the market, while 34% said clients were unwilling to engage with the subject. One adviser said discussing long-term care with clients was "a difficult and emotional topic" with clients believing it signalled the beginning of the end of their lives, while others believed it wouldn't be an issue that affected them.

Other advisers said the lack of access to specialist advice was an issue. Another adviser said clients were unwilling to invest in immediate care annuities.

Advice for products

The issue of finding appropriate long-term care advice has been highlighted time and again. We asked our participants whether they thought there was anything that could be done to improve matters.

Almost four in ten (39%) advisers said there needed to be more advertising, while 15% said advisers could play a bigger role in directing people to specialist advice. Ten per cent said more should be done to highlight the work of not-for-profit body Society of Later Life Advisers (SOLLA), which works to help customers and their families gain access to high-quality accredited financial advice.
So it is clear that more needs to be done to highlight the role of specialist advisers in this area, but what about the products available to meet the costs of care?

At the moment, the UK market only has immediate-needs annuities that are bought at point of care and equity release looks set to become another important means of funding. We asked the survey participants whether the products currently available were fit for purpose - the response was mixed to say the least.

Almost half (46%) said they didn't think the current products were fit for purpose, while 42% said they thought they were. A further 12% said they didn't know.
We asked those who said they didn't think current products were fit for purpose to explain why. Lack of choice was a major issue with 31% of advisers,while 22% pointed to cost issues. A further 16% highlighted the lack of flexibility, while 6% said the problem lay in the lack of providers in the market.

The way forward

So if there is a lack of products out there to help fund long-term care, what needs to happen to make this market easier for advisers to advise on in the future?
We asked advisers whether we need to see a fundamental shift in how long-term care is funded and whether a partnership approach is needed. More than 70% (71%) said yes, with a further 20% saying possibly. Only 8% said no.

Of those who said no, one adviser said long-term care should be funded via taxation. Of those who said yes, suggestions included the need for advisers to work more closely with local authorities, while another said the state needs to be more open about the issue and that there should be a shared responsibility with the emphasis being on self funding.

Another way of potentially funding long-term care is equity release, but these products have attracted negative publicity in the past. However, the industry has since become regulated and operates under strict guidelines - will we see more advisers seeing this as a potential solution?

There does seem to be a large swing in favour of equity release, with 85% of advisers saying such products have a role to play in long-term care funding. Only 9% said they didn't think this was the case .

The other major issue in long-term care at the moment is the Dilnot Commission, which is due to report back in July. What would advisers like to see come out of this? Clarity was the most important factor for almost a third of advisers (31%), with one adviser calling for a "structured way forward to enable the ever growing cost of care to be sustainable in the future, without overburdening any particular section of the populace", while another adviser asked for "clarity and consistency going forward."

Almost a fifth (19%) asked for a fairer system going forward, while 9% said there needed to be more awareness of the options available.

It is clear that advisers have to face many challenges when it comes to offering long-term care advice. A lack of available products along with complexity in terms of what local authorities will and won't pay for all add to the adviser's burden. It is to be hoped that the findings of the Dilnot Commission can do something to unravel this complexity.