Whatever politicians say, the thrifty WILL foot the care crisis bill

AS INVESTORS we should take a close interest in the debate over funding care for the elderly.

Politicians have tended to drop this hot potato, but providing our seniors with good- quality care is a moral imperative and reform will come at a cost.

In basic terms, anyone with assets of more than £23,250 has to foot the entire bill themselves — a threshold that most agree must be raised.

Whether the family home is taken into account depends on who is still living there.

In the case of a couple, when the first partner goes into care the home is safe. But when the second leaves it is up for grabs, except in specific extenuating circumstances.

So how much are we on the hook for?

Care home fees average £600 per week or £800 for nursing care, according to Age UK, though a Laing & Buisson report last year put them slightly higher.

Help at home can cost upwards of £20 per hour.

So entering a care home is likely to cost £ 30,000 to £ 50,000 annually, while 14 hours a week care at home could cost at least £15,000 a year.

A good financial adviser will usually suggest you keep enough for two years of care in a cash savings account.

To build a £50,000 fund, you would need to save £141 a month for 20 years, assuming the money is conservatively invested and makes 4.5 pc a year.

With better returns of 6 pc you would need to put away a monthly £110.

It seems to me that most of us fall into one of three broad categories.

First, there are those who could afford to save and have done so. Then, there are those who have never had the opportunity or the means to save. That is where good state help must be available.

Finally, there are those who could save but choose not to — and this is where incentives or taxes must come in.

My views have changed as I have grown older. I used to think that it was outrageous that anyone’s home should be sold to pay the bills after they had gone into care.

Now I think differently. Most of us who have accumulated wealth have done so with the help of some tax relief such as on pensions and Isas.

Older housebuyers will have enjoyed tax relief on their mortgage interest as will buy-tolet investors.

Our homes have rocketed in value through an economic quirk of having too few homes on a small island with a burgeoning population.

If I needed care and demanded that the state pay, I would, in effect, be expecting other taxpayers, who may well be less well off than me, to help preserve my wealth.

My stepchildren would get a larger inheritance, all thanks to the tax contribution of people who may earn far less than them or me.

It’s the essential argument of any government funding including university tuition fees.

There is not a care fairy who will magic up money.

People begin to pay tax when they earn £12,500 a year, while National Insurance at 12 pc starts at £166.01 per week.

I don’t think people on those sorts of wages should contribute to the cost of my care.

But I do think there should be incentives to save for old age.

Baroness Ros Altmann, a former pensions minister, suggested a care Isa that would shield money saved from inheritance tax, should it not be needed for care.

My fear is that offering this on top of existing Isas and pensions might provide a tax dodge for the wealthy, while not really offering much motivation to the profligate to put money away.

But I can see potential in the pension system. Currently, we are allowed to draw down a lump sum of 25 pc of our pension fund tax free.

What if we were allowed to take a greater tax-free sum with the condition that this extra money were locked in a special plan to pay for care? It could remain in the pension system and, if not used, be passed on to a family member free of inheritance tax.

For example, a £25,000 lump sum invested by a 65-year- old might have grown to almost £83,000 by the time they were 85 — and almost £112,000 by their 90th birthday with 6 pc growth.

What, though, of those who will not save?

Former work and pensions secretary Damian Green last week bravely suggested in a report published by the Centre for Policy Studies that a 1 pc National Insurance surcharge should be levied on the over-50s.

However, the problem with a tax is that you have to trust politicians to spend it as they have promised.

But what about some form of semi- enforced saving with tax relief as with pensions autoenrolment, so those who have already saved are not asked to pay twice?

There will be no perfect solution, but if we want our elderly to spend their later years in comfort and with dignity, then we will all have to pay for it.