The Cost of Aging – Fairness Across the Generations
This week an influential House of Lords Committee produced an important Report on the effects of our ageing population. The Report made a number of recommendations and in particular demanded that all of the Political Parties set out detailed proposals in their manifestos for the General Election, due to take place in 2015, stating exactly how they intended to deal with the demographic changes that will undoubtedly affect us all over the next 20 years. The Committee also suggested that whoever forms the next Government should set up two Commissions, one to investigate the financial aspects that will arise and the other to look at Health and Social Care issues. In order to stress the urgency of the situation the Committee proposed that these two Commissions should begin their work immediately after the Election and report within a 12 month period.
The Report achieved considerable press coverage, despite its publication competing with the election of a new Pope. Most of the media, however, concentrated on the opening line of the Report that described the current state of preparedness for dealing with possible difficulties as “woeful”. There is no doubt that the Report is an impressive indictment of successive Governments and their failure to prepare for these easily predictable developments. No doubt, many elderly individuals will welcome some of the proposals that the Committee brought forward, in particular the removal of the present, wholly artificial, barrier between Health Care and Social Care requirements. The idea of a 24-hour integrated Care System, coupled with a greater emphasis upon the provision of housing better suited to the needs of the elderly will also have been greeted with some enthusiasm. The notion of greater information and certainty about matters such as life expectancy, the State Pension and benefits from defined contribution private Pension plans would probably be helpful.
Perhaps less attractive and certainly less well-publicised, were suggestions by the Report that the usual retirement age will need to increase yet further and that older people must be prepared to use the wealth that has accrued within their homes to fund care in later life. The present Government has recently announced an intention to cap the amount that anyone is required to contribute toward their Social Care costs. One of the stated aims of this proposal was to avoid the need for elderly people to have to sell their homes to fund Care Costs. As we explained previously, however, the proposals are somewhat less generous than the Government would have you believe. This Committee suggests that it is unreasonable to expect the younger generation to fund the rising cost of Health and Social Care while the elderly retain wealth that they have accrued, simply as a result of huge rises in property prices over the last 40 years. As the Report suggests younger people are likely to feel even more aggrieved by any suggestion that they should pick up the bill for the previous generation when they, themselves, are being priced out of the housing market by the very same rises in property prices that have generated so much capital for older citizens. One of the suggestions from the Committee is that there should be a far simpler and less expensive way of releasing capital from an individual’s property than the current Equity Release Schemes that are marketed by a limited number of Financial Institutions. Unless the Government, either directly or through Local Authorities, is willing to fund such a proposal it will be left to the Financial Markets to decide what is to be offered. The Committee itself points out that in many respects markets generally are failing the older consumer. We have seen nothing from Banks and Insurance Companies that suggests to us that they are likely to be willing to provide low-cost Equity Release Schemes simply because they are in the interests of the Country.
In reaching its conclusion is the Committee heard evidence from 67 witnesses as well as receiving a host of written submissions. The witnesses ranged from academics in the field of demographics to charities involved in the provision of help to the elderly. The Report runs to some 108 pages and clearly demonstrates the significant amount of thought that has been given in the course of its production. Whether it will spur this and the next Government to adopt a more joined up approach to these matters remains to be seen, but one thing does appear to be quite clear, neither the current elderly generation, nor its successors can expect the State to appear on a shiny white steed, riding in to solve all of the problems that aging brings. Individuals will need to plan for their old age and, when decisions need to be made, will need to have expert advice to ensure that they understand all of the options that are available.