Eyebrows were raised during the 2017 election campaign when Theresa May claimed she wasn’t ‘U-turning’ on her infamous ‘dementia tax’ proposal to fund social care, after promising an “absolute limit” on the amount people will have to pay for their care.
After the Tories lost their majority, paying for social care by forcing people to sell their homes became a non-starter. Since then, the government has spent the last 18 months preparing the social care Green Paper detailing its alternative proposals – now due before the end of this year. Yet with the publication of the Green Paper already having been delayed several times, few expect this deadline to be met.
Finding a commonly acceptable solution to a problem putting significant financial pressure on local authorities is tough – not least because of our aging population, with an additional 8.6 million people aged over 65 expected by 2070. But, with the government announcing in the meantime that it won’t even go ahead with the planned £72,500 cap on care costs suggested by the Dilnot Commission, for those facing the prospect of years of care it really is the case that nothing has changed.
Forcing people to sell their homes to pay for care, understandably, wasn’t an idea many took kindly to. But without any government action to ease the care costs burden on the horizon, people are taking action themselves by choosing to tap into property wealth to pay for care costs off their own back.
We’ve seen the growth in home finance options being used to cover care costs first hand. Home improvements have long been one of the more popular uses for releasing property wealth among homeowners over 55. For the first time, in Q3 of this year, half of our customers said they were using equity release for this reason – boosted by the 1 in 8 (12 per cent) specifically using it for home adaptations, such as wheelchair ramps and stairlifts. Our research shows that people would prefer to ‘age in place’, installing features allowing them to receive care at home, rather than moving into care.
The increased innovation in home finance products driven by the sector has made it more convenient for funding care costs. For example, consider couples where one partner moves into residential care, but the second partner remains in their home. Tapping into property value gives the second partner the freedom to stay in their own property, while releasing funds to support care costs for the first. Other features such as cash reserve facilities that allow further funds to be withdrawn at a later date provide security and reassurance, should the second partner have their own domiciliary care needs to pay for at some point.
Newer options, such as those that allow buy-to-let landlords to unlock some of the value from their portfolio properties, work particularly well: landlords can access a lump sum, while still being able to draw on the regular rental income from the property. It is an arrangement which advisers have told us is particularly well-suited for retirees who need the income to cover ongoing care costs, as well as those who treat their property as their pension.
Customers are becoming attuned to the costs they are likely to face – helped by tools such as care cost calculators which help retirees find out what support they are entitled to and to anticipate how much of the cost they will need to cover themselves. For many, property wealth will be the only asset they can draw on substantial enough to meet these demands. As we see increased comfort among homeowners with viewing property wealth holistically, this will likely swell demand for equity release.
In the absence of clarity from the government, the frustration of homeowners waiting for news on what support they can expect is understandable. But while nothing may have changed when it comes to government action on care costs, it certainly looks as though something is changing in how willing people are to use property wealth to fund them – so long as they can do so in a way that keeps them in control.
Alice Watson is head of marketing and communications at Canada Life