Compulsory insurance scheme proposed for social services costs

27 Jun 17

A compulsory insurance scheme, charging around £30 per month, should be introduced to fund the spiralling social care costs, the Reform think-tank has said.

Today’s report argues such a scheme, which would be mandated by the government, would pay for the growing costs of caring for an ageing population, which are expected to rise from £19bn this year to £30.5bn in 20 years time.

The think-tank estimates if working-age people paid £30 per month charge, with a matched amount from an employer, would be enough to meet these costs, alongside changes to pensions and other pensioner benefits.

Danail Vasilev, report author, said: “The current crisis in social care will only deepen given the long-term pressures facing the system.

"Compulsory insurance is the radical action needed to pay for the growing ranks of people with social care needs.”

The report agrees with the Conservative Party manifesto’s recommendations to raise more funds for social care from housing wealth, from a less generous state pension and from the winter fuel allowance. 

Reform back the Tory manifesto pledges to raise more cash for social care from housing wealth, replacing the triple lock protection for pensions and changing the eligibility for winter fuel allowance.

However the think-tank said that these changes alone would not be enough to meet the rising costs of social care.

Today’s reports states: “To raise funds for social care on the necessary scale, one option would be to raise taxes.  Reform argues against such an approach because it would be unfair to young people as the population ages.”

The research noted that a 26-year-old today will pay a third more tax by the time they approach retirement in order to fund social care than people born just ten years earlier.

In contrast Reform propose, working-age adults save each month into a pooled Later Life Care Fund. The compulsory insurance scheme would see funds built up to pay for future social care costs, avoiding transfers of wealth between generations.

Reform said: “The long-run performance of pension funds suggests the cost of social care would fall by 18%”.

The £30 per month figure was based of a the German system which requires working-age adults to pay 2.55% of earned income in contributions.

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