Extend the uncertainty?

Malthusian

lisyloo wrote: »

Well it’s not working well enough and the numbers requiring residential care are only going to increase.
The social care sector is in crisis.

The social care sector is designed to exist in a state of permanent crisis. As long as it attempts to provide high quality care to everyone for free it will always be in crisis.

Both our parents were bed blocking in hospital which is £3k per week for the bed only and causes delays for other patients.
Homes are currently closing down often due to not being able to meet various rules e.g. min room sizes.

This is a serious problem and the obvious solution is to abolish minimum room sizes and build care facilities with wards and dormitories. Only we can't because the care system is supposed to provide high quality care to everyone for free. It's a self-created political problem and not about funding. Politics says that it is better for someone to bed-block in a hospital ward than be cared for in a care home ward. As the NHS is also designed to exist in a state of permanent crisis, it doesn't actually change much, it just means the waiting lists get a bit longer.

I think there are people interested in it (comes up on other forums) but probably not enough for it to be a worthwhile market.

When they say they are interested, what they mean is that they would like to buy a policy which cost the same as their home insurance and paid all their care costs, i.e. they would like free money.

Nobody is interested in a real-life care insurance policy that would cost hundreds or thousands of pounds a month for a risk they are already self-insured against anyway.

My thinking was that central government could help like they do with pensions, for example perhaps tax relief and promising the industry a higher take-up.

Nobody is going to pay the hundreds or thousands of pounds a month a care insurance policy would actually cost (to anyone who would want one) even with a 20% discount. And where is the case for subsidising people's inheritances via tax relief?

Having people insured would reduce the burdens on the nations finances as it does with private education, private medical, private pensions.

Everyone who would be able to take out care insurance is already not a burden on the nation's finance as they have sufficient assets to pay for their own care already.

Malthusian

As ever the problem with "care insurance" as a solution is that the "care crisis" is two entirely different problems, neither of which care insurance solves.

Problem A is that many people do not have enough money to afford what we regard as a minimum acceptable standard of care when they get older and become unable to look after themselves. This is a real problem.

Problem B is that many people who do have enough money want someone else to pay for their care. This is not a real problem. It is not a problem that somebody who moves home has to sell their old one unless they can afford to maintain two homes. The fact that they are moving home because their old one does not meet their care needs changes nothing.

Problems A and B are however repeatedly conflated because the media and politicians refuse to countenance a solution to Problem A that doesn't also solve made-up Problem B. No solution exists that doesn't involve a politically unacceptable amount of middle-class subsidy - Dilnot tried to square this circle and failed.

Care insurance is not a solution to Problem A. Because people affected by Problem A don't have enough money. Therefore they can't afford care insurance.

Care insurance is also not a solution to Problem B. Because people affected by Problem B already have enough resources to self-insure. Therefore they don't need care insurance. They like the idea of paying home insurance premiums to cover their future care costs but when you point out it would actually cost hundreds or thousands of pounds per month with a serious risk that they spent more in premiums than they ever claimed (that's how insurance works) they lose interest immediately.

If you really tried hard enough you could come up with a handful of people who are asset poor but income rich and for whom it could in theory be worthwhile to pool the cost of their future care. (With those who never needed care willingly paying for those who did, so that none of them had to worry about Overmydeadbody Grove.)

But it's a tiny number and insufficient to sustain a market for pre-paid care insurance. Most of the people talking about the issue are not in that handful, they just want someone to subsidise their inheritance while pretending it's about people who can't afford care.

AG47

Crashy_Time wrote: »

Yep, people who just recently signed on the mortgage line are going to wish they never listened to a bunch of landlords and 1990`s buyers. At least rates are still low but I reckon any further EU break up could see rates spiking, the market just dribbled it`s dummy again because the US doesn`t have much excuse to cut either. Funny old times.

https://www.wsj.com/articles/global-stocks-fall-as-u-s-rate-cut-prospects-recede-11562563827

Rates will go back up to normal, the longer they stay at these emergency low levels the bigger the problem.

Yes those signing mortgages at this time will regret it as interest rates go back up and values come down, so they are in negative equity

LHW99

Nobody is going to pay the hundreds or thousands of pounds a month a care insurance policy would actually cost (to anyone who would want one) even with a 20% discount. And where is the case for subsidising people's inheritances via tax relief?

I think there could be a case for allowing tax-free use of pension pots for this purpose. It already happens with immediate care needs annuities provided the funds go direct to the care home.

lisyloo

AG47 wrote: »

Rates will go back up to normal, the longer they stay at these emergency low levels the bigger the problem.

Yes those signing mortgages at this time will regret it as interest rates go back up and values come down, so they are in negative equity

Have you not heard of fixed rate mortgages either?

triathlon

MobileSaver wrote: »

You and your HPC buddies have been saying that for approaching twenty years... some people who ignored your misguided predictions back then will have paid off their mortgage by now and could be living in their homes rent and mortgage-free for the rest of their lives.

The really sad part though is that you know you made the biggest financial mistake of your life all those years ago and yet you continue to try and convince other people to make exactly the same mistake. Karma has a way of balancing the books so perhaps you should have a serious think about why in your fifties you are still living in a bedsit in an area that not many other people want to live in?

They will go 25, 30, 40 years and be saying "anytime now". Theirs is no longer a prediction, it's more like a prayer, a prayer to partially escape the nightmare for themselves they caused. Like you said the vast majority of them are screwed, my advice for them now would be to get all Zen about the situation and work on their perspective, they need to embrace bedsit land and their low standing in life, and lets be honest about this in 2019, you don't own property 35 + and there is not much going for you, and they need to find all the positives from that type of life. I would not fancy it myself, In my 50's now and I am already in a position where home is paid off, rentals are closer to being paid off but not quite there yet, and if I wanted I could pack it all in next week and retire well off, but to not even own a home now just makes me go cold thinking about it.

AG47

lisyloo wrote: »

Have you not heard of fixed rate mortgages either?

Have you not heard that fixed rates come to an end at the end of the term?

lisyloo

AG47 wrote: »

Have you not heard that fixed rates come to an end at the end of the term?

Yes I have, but by then some equity has been paid off and incomes have risen so you are in a better position.
Mortgages are nominal which means they decrease in real terms.
Ironically in the high inflation environment you talk about they decrease faster in real terms (although that’s a fantasy as we have a lot of people working to keep inflation within range and they are doing a really good job).

westernpromise

AG47 wrote: »

Have you not heard that fixed rates come to an end at the end of the term?

We've had 0.5% base rates or thereabouts for 10 years now. You can still get fixes today for 10 more years.

That's 80% of a mortgage term. After 80% of a mortgage term you've paid off over 70% of the loan. But I expect you think the money would have been better spent renting and buying £10 of silver a week, right?

Malthusian

LHW99 wrote: »

I think there could be a case for allowing tax-free use of pension pots for this purpose. It already happens with immediate care needs annuities provided the funds go direct to the care home.

Immediate care needs annuities are tax-free because they're bought using money that has already been taxed. Pension money hasn't been taxed yet.

Non-care purchase life annuities are partially taxable because there is considered to be a potential investment element (while the element that represents your own money being paid back to you is not taxed). If the whole lot is paid to a care home there's clearly no investment element.

There is no moral case for subsidising somebody's inheritance by making withdrawals from pensions tax-free if they are used to pay for care, any more than there is for making withdrawals tax-free if they are used to pay for an independent person's housing, food and other bare necessities.

What would be the point? By getting the State to pay 20%+ of someone's care costs they'll run out of money more slowly and postpone the day the State has to pay 100%? But the State hasn't saved any money, because if someone eventually runs out of money, the State has just spent money on the tax relief that it was going to spend anyway. Whereas if they don't run out of money (and people usually don't), the State has handed a bung to their heirs.

This makes Problem A worse, because by subsidising the inheritances of those who have enough money to pay for their own care, there is less to go around for those who don't have any money to get tax relief on.