Post-Election Briefing: long-term care

On Thursday 20th April the new coalition government published a programme setting out its plans for the next five years. With the public sector budget deficit currently at £156bn the focus is on reducing this debt, beginning with £6bn worth of cuts to non front-line services. BelowHealth Insurance asks what the protection industry can expect during the next parliament.

Government plans: A commission on long-term care will be established, which must report within a year. It will consider a range of funding options, including voluntary insurance and a partnership scheme in which the state would add to contributions from individuals. The previous government’s Personal Care at Home Act, pledging free care at home to 280,000 people in greatest need, will not be implemented.

“What they really need to do is to once and for all quantify the problem over the next 25 years and try and identify what quantity of public funds can be used. That will leave the very clear position that the rest needs to be self-funded. They can also make progress by mandating a national care needs assessment – which is very variable currently – and getting some commonality of state funding across local authorities. We need to point out that care annuities are not just a niche solution for the very rich.”

Background: The new government has agreed to create a single welfare to work programme. Already, under the Labour government’s programme, just five per cent of employment support allowance (ESA) claimants are found unable to work. Meanwhile, the latest statistics from the Office for National Statistics show that the unemployment rate for the first quarter of the year was 8% or 2.51 million, the highest figure since the last quarter of 1994.

“I don’t actually believe that there is direct link between the difficulty or not of accessing state benefits and number of protection sales. It’s still something people tend to have to be convinced to buy and income protection does not sell for a whole host of other reasons. However, it’s a good opportunity to get people to think about their circumstances and what would happen if their income did reduce to the level of state benefits. In terms of unemployment, a lot of people are not aware of what they are entitled to at work and what cover they could lose with their job. Most people in the UK are never more than a month away from losing employer benefits so it’s an opportunity to encourage them to top it up with something that is going to go beyond that.”

Background: Earlier this year the Labour government announced a fast-track review of the DRA. Aon Consulting warned that if it was increased to 70 the cost of providing group income protection benefits could increase by 20%. The new government has pledged to phase out the DRA.

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