The Big Question: What impact do you think the NHFA mis-selling story will have on the long term care market?

Each month Retirement Planner asks leading industry figures to answer one big question...

Ian Atkinson is long term care expert and IFA at Retirement Solutions UK

I must say I am deeply shocked by the NHFA scandal. It's hard to believe that mis-selling on this scale could happen in this regulated environment.

On the flip side, it has meant that there has been an unprecedented amount of media coverage highlighting immediate needs care plans, and with just 5% of people who self-fund their care aware that these products exist. This has not only helped educate consumers on all their long term care options, but will also surely stop anything like this ever happening again.

The Government now needs to bring in a structure where people have the greatest possible incentive to make provisions for future poor health because they know there is a system that is predictable and stable. To this end, I was very disappointed to learn that it will now almost certainly be 2025 before any of Dilnot's funding recommendations are considered. Unfortunately, unless protecting yourself for future possible care needs is compulsory, I suspect that the vast majority of us will adopt the "it won't happen to me" approach.

This means that in the foreseeable future there will always be a need for immediate care plans to be considered as part of the solution.

Peter Carter is product marketing director at Metlife

Everyone involved in the long-term care market is waiting keenly for the Government's response to last year's Dilnot Commission on Funding of Care and Support.

Proposals in the report could potentially invigorate the market which needs increased innovation and flexibility as the UK grapples with how to fund long-term care for an ageing population. The OECD estimates the UK will need to find £50 billion a year extra to pay for care for the elderly and that cannot come from the Government alone.

The NHFA mis-selling scandal undermines trust in the industry at a crucial time and must not be allowed to happen again when there is a real need for long-term care solutions.

The truth is that nobody involved in the market has really made a good fist of it. The cost of the products available has been a major impediment to it developing properly for the benefit of consumers and providers.
Dilnot's proposals could make the cost of providing long-term care solutions manageable for insurers with the Government picking up the "tail risk". That would be the best way of ensuring NHFA does not have a major impact on the long-term care market.

Andrew Gadd is head of pensions research at The Lighthouse Group

The simple answer of course is that any mis-selling story such as this is, to say the least, not helpful.

To put the position in context a survey by the insurer Aviva found that half of those who responded had no plans in place to meet the costs of long-term care while the bill for a two year stay at an average care home is at least £50,000.

In July 2011 the Dilnot Commission on Funding of Care and Support in England recommended that the bill individuals have to pay for care should be capped at £35,000, while under the current system, charges are unlimited. The Government is however still considering the issue of capping and has said that it will produce its response to the Dilnot Report in Spring 2012.

Looking ahead when considering the funding of long term care there are various options open including, for example, insurance policies to pay for immediate-needs care and pre-funded care. Pre-funded policies are not popular, not least because you may never need to claim on them and so the money used to purchase the policy is lost. This means that, unsurprisingly, immediate care annuities are more commonly used by families wanting a hedge against part or all of the cost of care fees should their relatives live longer than their capital but the initial outlay for these policies can be large.

The fact is that if the Dilnot Commission recommendations are accepted and adopted by the Government, insurance products designed to meet the cost of care up to the cap are likely to become mainstream and hopefully cheaper and simpler.

Chris Horlick is managing director - care at Partnership

My greatest concern is that the NHFA fall out will dissuade advisers from entering the care market and consumers from seeking advice. This would be the worst of all outcomes for elderly people and their families who are at the point of needing care and support. Research demonstrates that 25% of self-funders for care deplete their capital prematurely and fall back on the state. This is a bad outcome for everyone concerned. I remain firmly of the opinion that all self-funders should seek and be referred to specialist care fees advisers.