The Equity Release Council hosted two events in Parliament on Monday 9th July:
1. Committee Room Debate: Can equity release help meet the adult social care challenge?
Council members and stakeholders participated in a wide-ranging debate in Portcullis House sponsored by Rt Hon Dame Caroline Spelman MP and hosted by Equity Release Council Chairman David Burrowes, asking can equity release help meet the adult social care challenge?
Setting the scene, the Council’s newly appointed Chief Executive Jim Boyd illustrated how the UK population is ageing. In 1917, George V sent birthday telegrams to 24 centenarians; in 2016, 6,000 such messages were sent by the Queen. The age distribution of the UK is changing, with the number of over 65s increasing, while those of working age is expected to decline over the next 20-30 years. The falling working population means that innovative solutions will be required to fund the care needs of older people.
Rt Hon Damian Green MP commented that public policy has not reacted sufficiently to the ageing population and hoped that when the government publishes its social care green paper in the autumn, it is innovative and brave, to ensure an appropriate standard of care is available to everyone who needs it.
Mr Green contended that to meet adult social care needs, more resources were required; access to care should depend on need and not cause; and increased revenue needs to be collected in a fair manner.
Recognising the potential of housing equity, Mr Green commented that in 2010, state spending on care was approximately £7 billion, while housing equity for the over 65s now stood at roughly £1.7 trillion. Housing wealth could therefore help meet a need, particularly for the current generation of retirees, but to encourage greater take up the right incentives needed to be in place, such as equity release customers being able to set a guaranteed minimum of inheritance to be passed on. Mr Green also advocated a mandatory care insurance scheme.
Jacqueline Berry, Director, My Care Consultant, contended that the retirement and care landscape was complex with public understanding of how care was funded very low. Those with understanding of how the care system operated felt it was fundamentally unfair. Her organisation held the view that social care should remain free at the point of need for the most vulnerable and poorest in our society, but for those with financial means should make a reasonable and proportionate contribution. To achieve an equitable and sustainable funding solution, political collaboration and out of the box thinking was required.
Steve Lowe, Communications Director at Just Group commented on the behavioural barriers that contribute to disengagement from care planning, with many consumers exhibiting an ‘it won’t happen to me’ mind-set. Public engagement is required well in advance of the point when people may need care, with a clear challenge to address the present inertia evident among 40-60 year olds in relation to later life planning. Inertia and disengagement is evident both in relation to retirement funding as well as later life care needs, and effective interventions will be required to change this situation.
Outlining a potential solution to meet future care needs, Mr Lowe described the potential benefit of a ‘home equity pledge’ that could allow homeowners to draw upon housing wealth to help them meet future costs. This policy proposal would create a new care funding mechanism based on individuals committing a ring-fenced proportion of their property wealth for the specific purpose of helping to pay for care, should it be necessary. The proposal reflects the large pool of housing wealth held by older homeowners, who may be encouraged to plan for later life costs if attractive planning options are made available.
In response to comments from the panellists, attendees agreed that there is widespread confusion about the retirement options available to savers in the new pensions environment, as well as the operation of the care system nationally and locally. A public awareness campaign would no doubt be beneficial to increasing awareness, but to be truly effective, this would require significant funding.
Regarding product solutions, the equity release sector should build on the great strides it has made to increase flexibility for consumers, and by ensuring that product offerings closely match customer need.
Can equity release help meet social care needs? The overwhelming view was yes, but with the following caveat – simpler, long-term solutions must be put in place to build industry and consumer confidence.
2. Summer Drinks Reception – How can equity release help meet the challenge of intergenerational fairness?
Following the committee room debate, members were treated to a tour of the House of Commons by David Burrowes. The highlights of which cannot be revealed here – you will just have to contact David to get yourself on the next one!
At the conclusion of the Commons tour, the group arrived at the Council’s summer reception themed around intergenerational fairness. We were fortunate to see attendance from MPs from across the House, with a keynote address from Economic Secretary to the Treasury, John Glen MP, who made clear the imperative role he sees equity release as having and the importance of the sector as it continues to grow. Mr Glen thanked the Council and its members for the industry’s efforts in ensuring sector growth is carried out safely and responsibly, with consumer interest at heart.
Overview of the UK population
Occasional Paper 31 – Ageing Population and Financial Services
A Good Retirement
Means Testing Adult Social Care in England
Paying for care costs in later life using the value in people’s homes
Personal Care Savings Bonds: A new way of saving towards social care in later life
Flexible and affordable methods of paying for long term care insurance
Unlocking the potential