Dr Louise Overton, from the School of Social Policy at the University of Birmingham said in an Equity Release Council (ERC) report out today that lifetime mortgages could play a key role in funding care and a lifestyle at home, instead of waiting for escalation to critical needs.
“Most older people live in mainstream [housing] so there is an opportunity for the industry and government to send a clear message that equity release offers a (partial) solution here. Indeed, the Universal Deferred Payment Scheme applies only to care in an institutional setting, so commercial equity release products may be more aligned to older people’s preferences for ageing in place, and to achieving the Government’s aspirations of transform[ing] the social care system to focus on prevention and the needs and goals of people requiring care,” she said.
Mind the gap
Overton said the gap between the expectations of policymakers who think the elderly should fund their own care and the preferences and practices of elderly people must be bridged. The lack of trust between stakeholders like financial advisers and local councils was another obstacle, she said, when each party wanted the same outcomes but couldn’t bring themselves to work together.
She said: “Local authorities were often reluctant to signpost self-funders to financial advisers who could offer a range of funding options, due to the fear of liability for poor advice, and financial advisers saw local authorities as a source of misinformation, not acting in clients’ best interests.”
She added: “A much greater level of cross sector trust and awareness is therefore required if the potential for equity release to play a role in meeting social care costs is to be achieved.”
She concluded: “We found little evidence that reluctance to pay for care using housing equity was rooted in strong support for inheritance, or in cultural attachments to the owned home. Rather, perceptions of unfairness were associated with intragenerational disadvantage for responsible saver-citizens who had ‘done the right thing’, by paying taxes and mortgages.”
Desperation to stay in home
The 24-page Equity Release Council report also revealed the lack of thought and knowledge about future care needs, although a survey revealed 67 per cent of over 50s are still determined to stay in their own homes fearful of residential care homes post-Covid.
The ERC’s report, Solving the social care funding crisis: perspectives on the contribution of property wealth, published with Pure Retirement and My Care Consultant, shows the pressures of the pandemic have left a majority of UK adults concerned that care is too expensive, lacking in public funds and not fit for purpose.
Three in five over-50s say they are fearful of having to move into residential settings and the determination to receive care at home grows stronger with age, rising to 76 per cent among over-70s.
The findings also show over one in five didn’t know they have to contribute to social care costs in later life and half of the adult population have not considered how they will pay for long-term care needs, with 18 per cent making no provision at all.
Government has debated a range of care funding solutions over the last decade, including caps on care costs, a social insurance fund, a National Care Service and higher taxes.
Last week the Government published its blueprint to integrate health and social care services and has pledged to bring forward proposals for broader social care reforms this year.
Cross-section of views
The Council’s research suggests nearly half of UK adults feel state funded care should be available for everyone to access, up to a certain point, with the option to top this up using their own finances. Meanwhile, 40 per cent believe care should be completely free at the point of use, while four per cent believe care should be completely self-funded.
The findings also highlight that under the current system:
• 5.5m people and their families have had to use their own income or savings to pay for a parent or elderly relative’s care
• 4.6m have had to provide care within the family due to financial pressures
• 4.1m people and their families have had to sell a parent or elderly relative’s home to pay for care needs
• 4.0m have had to compromise on low quality care for a parent or elderly relative because they could not afford any better.
David Burrowes, chairman of the Equity Release Council, said the country is crying out for a care funding plan that is fair for all and sustainable in the long-term.
“We welcome the Government’s commitment to progress social care reforms this year to help people live independent lives for longer. With this issue firmly back at the top of the agenda, we urge Government to bring forward solutions that can make state-funded care available to all, up to a point, with people using their own funds and assets to top this up where needed. We also need to ensure that care provision can support people’s desire to have their needs met in the sanctuary of their own homes.”
Claire Singleton, CEO of Legal & General Home Finance said the cost of residential care varies by more than £800 a week depending on location: “Property wealth can be an important asset that many families will naturally turn to and our research has shown that the value of homes locally will most likely correlate with the amount people entering residential care can expect to pay locally. On average, people can [also] expect to pay more than £800 a week for private residential care, which is more than double the average weekly income for people in retirement (£320), according to the Department for Work & Pensions. As the ERC’s research shows, the cost and complexity of going into residential care can leave some people hesitant as to whether it is an appropriate solution for them,” she added.
Will Hale, CEO at Key said: “We need to educate people about their choices and how these might be financed. 4.1m people and their families should not be forced to sell the family home in order to pay for care but encouraged to seek specialist advice around how their assets, including housing equity, might best be used to provide them with the care they want and need throughout the stages of later life.
“Whether they want care at home, to move into a sheltered community or into residential care, we need to build a system that combines public and private finances to better facilitate that choice.”