LCP has proposed extending the principle of automatic enrolment from workplace pensions to UK social care, with an opt-out scheme designed to help people protect their savings against future care costs.
Under the proposal, taxpayers aged 40 and over, including pensioners, would be automatically enrolled in a scheme requiring contributions equivalent to 1p on the basic rate of income tax. The maximum payment would be just over £30 a month, with participants free to opt out, LCP said in its report Opt-out Automatic Enrolment - a way out of the social care funding maze?
Those who remained in the scheme would build up a discount on future social care costs, starting at 4% after one year and increasing by four percentage points for each additional year of contributions. After 25 years, participants would qualify for a 100% discount on eligible personal social care costs.
The scheme aims to pool the risk of “catastrophic” care costs. One in seven people are projected to need to spend more than £100,000 on care over their lifetime, according to LCP.
The consultancy said private insurance was “impossible to buy”, arguing that its proposal would allow people to protect their family homes and life savings against care costs.
LCP estimates that the proposed premium could raise around £3.5bn a year, generating revenue for the government before the full costs of the scheme materialise.
The report proposes using the funding to raise England’s social care means-test threshold from £23,250 to £100,000, as well as investing in preventative measures such as falls prevention, home adaptations and support for unpaid carers. It also suggests improving access to obesity and mental health treatment to reduce future care demand.
The revenue could additionally support the proposed NHS Integrated Health Organisations and help finance a national care service, bridging the gap between savings from changes to the state pension triple lock and the higher cost of the prime minister’s plans for free social care, without introducing new taxes, LCP said.
The consultancy said drafts of the report had already been shared with key figures in government and opposition and had “generated considerable interest”.
Former pensions minister and LCP partner Steve Webb said the success of auto-enrolment showed that a similar opt-out approach could be applied to social care funding, allowing people to pool the risk of “catastrophic” care costs and protect their life savings.
He said: “We have already had a very warm response to these ideas as we have discussed them, and hope that they might form a useful approach for consideration as part of all-party discussions.”
Jonathan Pearson-Stuttard, head of LCP health, said the proposed economic framework would help people meet care costs while generating “early funding to invest in keeping people healthier and independent for longer”.
He said: “Shifting our focus from treating illness to preventing it can strengthen communities, ease pressure on public services and support the health-driven prosperity on which a stronger economy depends.”
