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SJP urges combined public and private innovation to tackle social care crisis

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The new SJP Social Care Report calls for the Government to make social care reform and public education its priority post Covid-19.

Social care needs urgent reform and needs to pull in expertise and viable funding solutions from public and private sectors, according to a new report from wealth management group St. James’s Place. It warns, however, that funding from the private sector – individuals continuing to pay towards the direct cost of their own care – will be essential.

With the Covid-19 crisis once again putting the spotlight on the current state of social care in the UK and the need for urgent reform, the report outlines why it is imperative that social care is not overlooked once again, with effective measures brought in to address the longstanding issues surrounding social care.

St. James’s Place’s The Social Care Report – Tackling the UK’s Deepening Social Care Problem, outlines a range of practical ideas to address the estimated £8 billion a year funding gap for social care. This includes increases in general taxation, a new compulsory social insurance scheme and voluntary top up private insurance. The report also examines the viability or otherwise of other potential solutions, including whether a ‘Care ISA’ would work. Another option assessed is the use of existing pension schemes to make payments to care providers in a tax-efficient way.

St. James’s Place recently partnered with Care Sourcer, the UK’s first comparison and matching site for care, to provide a Care Concierge service to help elderly clients find and fund long-term care. SJP clients are offered a confidential telephone advisory service with Care Sourcer to help them make the right choices and put the right provisions in place to support their long-term care needs.

Tony Müdd, author of the Social Care Report and Divisional Director for Tax & Technical Support at St. James’s Place, says: “As many as 1.4 million people aged 65 or over in the UK receive some form of care.2 However, among the 25% of St. James’s Place clients who are 75 or over, we can see from their experiences that the current system is inadequate, complex and unsustainable. Put bluntly, it fails to meet the needs of far too many vulnerable individuals.

“Successive governments of all parties have been unable to tackle the issue. This is understandable, since any viable solution will ultimately need to include a greater level of public funding, which is going to require unpopular decisions such as increasing taxation or making cuts elsewhere.

“At St. James’s Place, we believe that private funding has a parallel role to play in rebooting the system. We are proposing that the state should provide a basic level of support that will be adequate for all, regardless of their financial circumstances – in a similar way to the state pension system – and individuals should have the opportunity to ‘top up’ their care using their own wealth.”

The St. James’s Place Social Care Report outlines a number of innovations that could help to create a better, more integrated system to tacking social care issues. This could include granting additional tax benefits on payments from existing pension arrangements to fund care. Another option explored is a ‘Care ISA’, drawing on existing tax freedoms, although the report casts doubt over the effectiveness of such an option to improve the situation for the majority.

Another option could be to utilise private care insurance, with contributions based upon a combination of age, health, family history and level of benefit purchased. This could raise public awareness of the need to prepare for social care expenses, help spread the costs more widely across society and move some of the risk to the private sector. However, the report notes that providers are unlikely to want to enter such a private care insurance market unless there was clarity on exactly what the state would provide and when.

The report also looks at the models used in other countries and what lessons could be learned, including the potential for introducing mandatory social insurance, as used in Germany and Japan, paying into a separate social care fund that is ring-fenced and managed independently of the state. This would pool risk and potentially raise large sums over the longer term, yet may encounter problems with public acceptance, particularly post Covid, of making greater contributions, especially from employers, into a new and untested system.

“In order for this scenario to be achievable for as many people as possible, financial institutions such as ours must work with the government to create viable investment vehicles so that people can save for their top-up care – and the public must be encouraged to participate on a mass scale,” comments Tony Müdd.

“Meanwhile, all financial advisers should be equipped to support their clients not only in terms of how they fund their present and future care needs, but also in helping them understand and navigate the complexities of the current care system.”

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