Insurers are showing little interest in putting in place products to help people pay for future care needs, according to new research.
In a recent survey of 20 leading companies by the BBC, 17 said there was not enough demand to justify putting policies in place.
In January 2013, speaking on the BBC’s Andrew Marr Show, Prime Minister David Cameron said that the government’s cap on care fees “will then open up an enormous insurance market” so people could insure against “catastrophic [long-term care] costs that lead them to have to sell their homes to pay for that care.”
The £72,000 cap on care costs, which will apply from April 2016, will not include “hotel” costs in residential care, such as food and accommodation, which could run into hundreds of pounds per week.
The government had hoped insurers would develop new policies, so that people could make small payments in the years leading up to when they needed care to cover their costs.
But one of the companies that responded to the survey told the BBC that few people were ready to “defer consumption today to pay for an event which may not occur”.
Alongside immediate needs annuities – which provides a guaranteed income for life to help cover the cost of care fees, in exchange for a one-off lump sum payment, for people who have immediate care needs – the Association of British Insurers highlights other options for preparing for care needs such as enhanced annuities, for people whose life expectancy is shortened because of a medical condition or lifestyle, savings and investments and equity release plans.
Despite the lack of planning options in the marketplace, long-term care costs are likely to remain a key priority for many people, Moore Thompson can provide expert support to other professional advisers on tax-efficient arrangements as part of broader retirement planning, including business exits, pension provision and savings and investments and our sister firm, MT Financial Management, offers comprehensive advice on pension provision, savings and investments. For more information, please contact us.