Andy Burnham has set out his long-term vision. Reform of social care and pensions could impact long-term planning.
- The government is planning reform of social care
- Within four years, the triple lock will become a double lock
- Social care provision could reshape
Unlike his predecessor, it is very clear what Andy Burnham wants to do with the power he has inherited. His speech at the Labour party conference set out his vision for a new social care service, paid for – in part – by converting the triple lock to a double lock. Both policies may have implications for advisers.
The triple lock had started to look like a ludicrously generous bung to the elderly, with younger generations forced to pick up the tab. It had become the most obvious symbol of governments’ unwillingness to take hard choices in the face of increasingly stretched public finances. In that respect, its slow phasing out suggests some much-needed realism from the current administration.
For advisers it means government largesse towards pensioners is shifting, and greater self-reliance may be needed. While they can still count on inflationary rises, the astonishing recent rises in the state pension could be at an end. For the past three years, the state pension has risen in line with the earnings prong of the triple lock – that has seen increases of 8.5%, 4.1% and 4.8%, against inflation of 6.7%, 1.7% and 3.8%.
The quid pro quo is a social care service. For many families, the backstop could be a lifeline. Long-term care can be hugely destructive of long-term wealth, yet planning for it is a near-impossibility. Retirees either need to set aside money that they might not use, on which their heirs may pay significant amounts of inheritance tax, or face the reality of selling their home to pay for open-ended care (particularly in the case of dementia patients) and watching a lifetime of carefully cultivated wealth evaporate.
There will still be costs. The government has confirmed that food and accommodation would not be covered by the new plan. However, it may allow for more flexibility in long-term planning and inheritance arrangements, depending on the ultimate shape of the new rules. It could also be transformative for the finances of carers. AJ Bell estimates that providing care at home can cost someone over £1 million in lost salary and pension wealth over 20 years.
These are all long-term ideas, with little in the way of concrete plans. There may be a General Election to get through before any of them are implemented. Nevertheless, if they go through, it could reshape later-life planning once again.
