An automatic enrolment scheme for social care should be introduced, in a similar way to the initiative used to encourage people to save into workplace pensions, a former pensions minister has suggested.
Sir Steve Webb, a former Liberal Democrat pensions minister who is now a partner at consultants LCP (Lane Clark & Peacock), has co-authored a report suggesting that an auto-enrolment approach could be used for social care. The report proposes a new “social insurance” model for England.
Building on workplace pension success
It builds on the precedent of automatic enrolment into workplace pensions, which has brought more than 11 million people into pension saving since 2012.
The report said: “The UK of the 2040s, where large numbers of people are likely to be living with frailty in later old age, bears little relation to that of the 1940s when the modern welfare state was designed.”
How the scheme would work
Under the proposal, taxpayers aged 40 and over, including pensioners, would be automatically enrolled into paying a social care premium. They would also be free to opt out. Those who remained in the scheme would build up a discount on future social care costs.
The discount would rise each year as more was paid in and someone with 25 years in the system would be fully exempt from the requirement to contribute towards their personal care costs.
Sir Steve argued such a scheme could allow people to pool their risk of facing catastrophic care costs, helping people to protect the value of their assets from such a risk. Funds could be used in various ways, such as helping people to adapt their homes, better support for unpaid carers, and providing better access to treatment, it was argued.
Political context and funding plans
Prime Minister Andy Burnham previously said that from April 2030, Labour plans to adjust the triple lock, which is used to increase state pensions each April. The state pension overhaul would help to fund a new National Care Service in England.
Under Labour’s plans, the state pension will continue to rise every year at least by CPI (Consumer Prices Index) inflation or 2.5%. The door would still be left open to it rising by more than this if needed in some years, so that the state pension holds its value relative to average worker earnings.
The Institute for Fiscal Studies (IFS) has previously suggested that tax rises or other spending cuts would be needed to pay for social care.
Reactions and rationale
Sir Steve said: “Pensions automatic enrolment is a hugely successful policy which is admired around the world.
“There is no reason why the same approach could not be applied to the thorny problem of social care funding.
“At present, people are at risk of having their life savings wiped out by ‘catastrophic’ care costs, and have no way of pooling this risk with other people.
“This scheme, with an opt-out for those who don’t want it, provides an affordable and efficient way for people to protect their savings.”
Report co-author and head of LCP Health, Dr Jonathan Pearson-Stuttard, said: “Social care is one of the defining societal challenges of our time, but it is also an opportunity to do things differently.
“Our proposed economic framework would not only help people better meet the costs of care, but generate early funding to invest in keeping people healthier and independent for longer.
“Shifting our focus from treating illness to preventing it can strengthen communities, ease pressure on public services and support the health-driven prosperity on which a stronger economy depends.”
