A question of clarity

The Dilnot Report has been praised for bringing much needed clarity to the long-term care market. However, Helen Morrissey finds there are still some areas where more detail is needed.

The much anticipated Dilnot Report has been widely praised by the industry since it was published on 4 July.

If the government decide to implement the changes then the means tested threshold will be raised from its current limit of £23,250 up to £100,000.

While the increase may do little if anything to help those who have benefitted from high house price inflation over the years, the fact remains that many people who did face the prospect of having to pay for their own care are now less likely to have to do so.

Other proposals which met with widespread approval included the recommendations to cap liability for care costs at £35,000 with so called hotel costs (comprising living costs) capped at £10,000 per year.

These changes bring much needed clarity to families concerned about how the cost of care for an elderly relative will affect them financially over the long term.

Many in the industry believe the changes could prove the catalyst to tempt insurers back into the market with the development of new and innovative products aimed at helping the public to begin funding long-term care.

“We can now put a defined cost on long-term care and this will bring insurers back into the market,” says Retirement Solutions’ IFA and long-term care specialist, Ian Atkinson.

“For them the biggest reason to stay out of the market was the fact you weren’t pricing a finite risk. Being able to have more certainty is the last piece of the retirement planning puzzle.”

As a result, we could well see a flurry of activity in the long-term care market over the coming years as insurers come back into the market with a range of products.

Disability-linked annuities and equity release are just two of the possible options mentioned.

It is also expected that take-up of immediate needs annuities could increase as the premiums decrease off the back of insurers having more clarity as to the amount that needs to be insured.

Areas to consider

However, while these proposals do bring some degree of clarity to long-term care funding it is important to note that the situation is not clear cut, according to Partnership’s managing director  care, Chris Horlick.

“It is important that people fully understand the proposals,” he says.

“People with more than £100,000 in assets will still have to find substantial sums to fund their care. It’s also not going to just cost £35,000  there will be significant extra top-ups and it is unclear as yet as to when the meter starts running on the £35,000. It’s good to have clarity around this, but we need to find out more about what happens to people once they go beyond the £35,000 limit.”