Protection Review Conference

Transcription

1 Protection Review Conference The challenge of providing a Long-Term Care insurance industry in the UK Baroness Sally Greengross OBE Chief Executive ILC UK July

2 UK Population Change over 50 years Source: - OBR Fiscal Sustainability Report July 2011

3 Social care in figures About 1.8m people get state-funded social care 66% are over 65 More than 14bn is spent on social care by councils but once inflation is taken into account funding has hardly changed in the past seven years 2 million older people currently need care services but do not receive any services (PSSRU). Nearly 500,000 people are paying their own costs The average lifetime cost of care is 30,000, but for one in 10 it will total 100,000 Source BBC/Living Well at Home Inquiry -APPG on Housing and Care for Older People 2011

4 Maximum possible asset depletion Extending the means test helps the poorest Conclusions and recommendations of the Commission on Funding of Care and Support A Fairer funding system for adult social care - Dilnot Maximum possible asset depletion for people with 150k residential care costs 100% 5% 25% Median 75% 95% Percentiles of housing wealth 80% 60% Current system 40% 20% 35k cap with extended means test 0% 0k 50k 100k 150k 200k 250k 300k 350k 400k 450k 500k Assets on going into care

5 Role of Insurance in LTC? The Market There are no pre-funded LTC products in the UK and sales of Immediate Needs annuities remain low. The largest market worldwide is the U.S. with over 7 million policyholders but providers are withdrawing from this market! Solution Improved advice availability and access Combining LTC insurance with life insurance, impaired life annuities, critical illness, equity release and Pensions etc Source Geneva Assoc.

6 Property Wealth About 3 in 4 of those now retiring are owner occupiers 69% of year olds and 66% of people over 75 own their homes outright. It is estimated that there is a total of over 900 billion equity in the value of older homeowners homes, which raises the potential to release wealth to meet any future accommodation costs and contribute to the costs of their care. (DCLG, 2008) Source Living Well at Home Inquiry -APPG on Housing and Care for Older People 2011

7 The Working Older Population Over a third of UK workers will be over 50 by 2020 Labour market participation for the age group has increased in the last 15 years. The number of people working beyond the state pension age has : risen by 85% in the past 20 years, from 753,000 in 1993 (7.6%) to 1.4 million (12%) in Those retiring at 65 will face an average of 19 years in retirement Source ONS/Prudential/Geneva Assoc. June

8 Pensions Employee and individual pension contributions peaked in 2007 at 25.6 billion, and fell to 22.9 billion by The amounts paid into ISAs increases sizeably year on year, rising from 35.7 billion in 2007, to 43.9 billion in 2009/10, Conclusion: The UK s failing pension architecture, (DB- DC- Annuity rates?) is leading millions to abandon pension saving entirely, preferring to trust other vehicles such as ISAs. Source IOD report, Roadmap for Retirement Reform, April 2012

9 Source Defaqto Insight April 2012

10 Vision - Advice is Key Individuals, or their advocates, are able to make their own choices about the care and support that they receive Three generations of individuals: Working age who should look to save as much as possible into a savings, a pension or home Retired People who can plan for later life by making best use of pensions, savings and housing. People who need care (mainly 85+) looking for asset protection. A range of financial products is required: Health Insurance (Acute/Chronic; point of need, pre-funded Property wealth (equity release and deferred payments) Pensions (disability linked annuities) and savings. 10

11 Industry Challenges Education and Information Working Age Health & Protection Lifestyle and Health Context with Pensions Care in old Age Advice who pays and how?

12 So what next? However nothing will happen here until 2014/15 at the earliest and in the meantime 150,000 older people will enter the care system per year of whom 40% will be self-funders. Importantly older individuals should not wait but should seek advice now. Informed advice and support is now needed more than ever and Financial Services is perfectly placed to deliver that Over to you!