“Would you pay a social care premium?”

social care

This was the question Radio Five Live’s Wake up to Money asked its audience this Monday morning. 2.5% off wages for the prospect of insurance against things going really wrong with your health in later life?

The idea is being trailed by someone (presumably in Government) in advance of a Green Paper on the subject to be released by the end of the year. The idea was first mooted in Government circles in June (see here)

I guess a 2.5% pay cut in exchange for peace of mind may not sound too high a price to pay, but when the problem is so hard to get your head around, any solution that results in a real-time drop in standards of living will prove unpopular.

Unlike a pension, which has the benefit of living  better and a funeral plan which sounds a good way of sending yourself off, the prospect of an insurance that takes care of things like dementia (as well as younger problems like MS) is not a red-hot seller.

Another problem for the “pay 2.5% and forget about it” model, is that the kind of people who tune in to Wake Up to Money at 5 am on a Monday morning – aren’t the kind of people who let these things go.

So callers were making all kind of “yes if” statements. Yes- if I get to invest the money in the meantime, yes- if smokers have to pay more, yes- if I get to pick my care – and my retirement home. People who wake up to money don’t do social insurance.

The trouble with any social model is that it relies on cross- subsidies and we don’t know in advance the winners and losers. The same applies to annuities or even to collective pensions like DB or CDC. The “we’re all in this one together” argument is not very popular with those who have (or wake up to) money.

So I guess the answer from the “WU2M” listeners was  a conditional yes, with the conditions being that the system had to work for them 100% of the time.

This kind of thinking is pretty worrying, because if you extend it further – you start hypothecating all kinds of things like public spending on schools, the NHS and so on- then you start rebating taxes to those who don’t use those services so that all the money ends in the hands of the childless fitness fanatics who have worked hard all their lives and have pots of money anyway.

Which was where this debate was leading – before we got to 6am – and normal service resumed!

I have no doubt that those who believe in the purest form of capitalism, have created a lot of wealth that has been historically redistributed. I’m sure they don’t want to see higher social taxes to support the smokers and other social delinquents who haven’t displayed the discipline that they have. After all we owe them one.

But the can of social care funding has been kicked suffeciently far down the road , that either the road will run out or some big juggernaut of a financial disaster will run over the can.

The numbers being touted in the program suggest that we have to sort a solution to the social care problem – especially the problem of funding care for the people in the final years of their lives. The Green Paper will be another iteration of reports that go back before Dilnot – all saying that “do nothing” is not an option.

Doing something is harder than doing nothing; it is particularly hard if you are a weak Government, which is why a degree of social responsibility is required. Listening to those who don’t want change, or want change – but only on their terms- will lead to more social unfairness. That unfairness will happen in the short term – as austerity will continue to target the have nots.

So I think it’s time we breathed in hard and prepared for this Green Paper with an acceptance that something like a 2.5% social insurance premium for the over 40’s is needed – unconditionally.

 

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in CDC, Change, Charity, pensions and tagged , , , . Bookmark the permalink.

8 Responses to “Would you pay a social care premium?”

  1. George Kirrin says:

    Glad to read I’m not the only one who listens to WU2M sometimes!

    Not convinced about having separate funds for such causes. Government accountability isn’t up to it, and instead of investing it for growth as Norway and the Shetlands have done with their oil & gas funds, our lot would keep it in cash or government debt.

    Liked by 1 person

  2. Adrian Boulding says:

    How does taking new money out of payslips chime with “austerity has ended” ?

    Adrian

    Like

  3. Ian Neale says:

    Has the UK population been so thoroughly atomised over the last 40 years that no disbelief in ‘there is no alternative’ remains? Surely the pendulum is swinging back in favour of ‘we’re all in this together’? “No man is an island”. We have to make collective provision for the long term: social care as well as retirement income.

    Like

  4. Dave C says:

    I’d pay for it.

    But I won’t pay the lying incompetent fools in power in government an extra penny to waste on nonsense expenditure if I can help it.

    2.5% to this government is just another tax rise obfuscated by a supposed ring-fenced benefit. Ha!

    No thanks.

    If socialism is the order of the day, raise taxes fairly and pay the higher costs of social care that are borne.

    Like

  5. stefan zaitschenko says:

    Henry, If it works in the same way as the German Long Term Care Fund then I am all for it. I like the idea that it is a flexible method either providing care services or cash benefits to pay for a caregiver including a family member. One concern is that in Germany it started at 0.85% and has risen to 2.55%. As long as it was a true hypothecated tax unlike NIC.

    Like

  6. alan chaplin says:

    I don’t like the idea of hypothecated taxes but then we don’t have any (as far as I know) so maybe we should try one and see. I don’t get the case for over 40s only and no idea what the 2.5% would be levied on e.g. employment income, all income, other? I’d prefer approach of decide what level state should provide, raise taxes generally to pay for it. The level of tax rise informs the state cover naturally.

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  7. DC says:

    Henry, this could never work in reality and you know it.

    Whatever works on the continent, good for them, but consider how often pensions have been mucked about with. Each change was justified along the lines of making things ‘fairer’ and now look where we are.

    Nationalise long term care and you consign it to the same horrible fate.

    I could genuinely see an argument for individuals making contracts with LTC providers and receiving tax relief on the contributions. And make it portable – allow an individual to move this between providers to best suit their needs. That probably has legs.

    Unfortunately this would assume that people are rational and actually concerned about their own futures as opposed to relying on someone else to pay it for them. Much like the other institutions you mention. But at least they are functioning efficiently…

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  8. Following on from @DC in particular: It is a fact that of the current NI contribution approximately 2/3 rds currenly goes to social benefits, 1/3 goes to Pensions (I exclude Gordon Brown’s 1 % of earnings NHS tarriff). When the Auto-enrolment contribution is fully implimented at 7% of earnings joint e’er/e’ee the total NI payable is 31 % of eligable earnings and all this open to the sort of jigary-pockery that beset SERPS contributions. Would you really trust a government with another NI hike?

    AUTO ENROLMENT IS INVESTED WHERE? Fixed interest? Government stock?
    I would take money from these PAYG charletons rather than trust them with another penny of earnings.

    Like

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