Government needs to take uncertainty out of care costs
Rachael Griffin, tax and financial planning expert at Old Mutual Wealth, comments on the FCA’s occasional Paper 31, Ageing population and financial services and urges the government to create a campaign to ensure people financially prepare for mental or physical illness in later life.
Among the over-65 age group, 40% have a limiting longstanding illness. It is crucial that policy and regulation recognise the needs of this growing part of the population and the Financial Conduct Authority’s recent paper on the ageing population and financial services is an important step on a long journey.
A major burden on the ageing population, the FCA notes, is the cost of later life care, which has escalated in recent years. The government need to lead the charge on coming up with a long-term solution to the social care crisis and provide certainty about how care costs are funded. While the industry can remind people to think about care costs, the uncertainty makes it hard to plan as changes are on the horizon
Social care policy came to the forefront in the snap election, but has since fallen by the wayside as politicians focus on how to deal with the implications of Brexit. We are expecting a social care green paper in the near future and we hope that it will propose solutions that are simple, sustainable and communicated in consumer friendly language. Anything else will leave the public back at square one.
The paper points out that people often do not plan for the increasing possibility they may have a mental or physical illness in their later life, leaving them financially vulnerable. Any plan to tackle the growing shift in demographics, needs to include making sure younger generations today are prepared for the potential issues in the future. We agree a campaign is needed to ensure the public is aware of the financial implications of these illnesses and the increasing likelihood that they may affect them. It is encouraging that there are now over 2.6m lasting power of attorneys in place, but dangerous misconceptions still exist and any campaign that looks to raise awareness about LPAs also needs to ensure it has an education element about how they work.
While it is important to make it easy for older customers to deal with their finances, it’s also crucial to remember that older customers are often the main targets for scams and so we would caution that any other third party work-around should be used sparingly and have a robust framework. Otherwise, firms risk creating a hotbed for scam artists looking to take advantage of older customers.