“People can for £8,000 or thereabouts as a single premium at retirement meet the future costs of their residential care .”
Andrew Lansley, Shadow Health Secretary, BBC Today, 12 February 2010

Cathy Newman checks it out
The Conservatives have spent the week warning us of a £20,000 “death tax” – the price we may all have to pay for care and support in old age. Labour’s belatedly fought back, retorting that the Tories have wrecked a delicate cross-party consensus on the sensitive issue of social care.

In the political fracas that’s ensued, no one’s paid much attention to the Tories’ policy on social care – an optional £8,000 charge, payable on retirement. £8,000 you can choose not to pay sounds more attractive than a £20,000 levy you can’t avoid.

But have the Conservatives done their sums right?

Over to the team for the analysis
At the moment, people in England have to pay for residential care themselves if they have savings or assets worth more than £23,000. So all home-owners have to foot the bill, even if it means selling their house, something the Tories want to avoid.

Under their plans, anyone opting to pay £8,000 upfront when they reach retirement age would in exchange be guaranteed free residential care, if they need it later.

The Conservatives say the scheme would pay for itself and require no public cash, no matter how many, or how few, people take it up.

They’ve worked it out like this: on average, one in five people needs residential care costing £25,000 annually for a two-year period at the end of their lives.

According to the Tories, five people need to pay into the scheme to cover the cost of one person claiming on it.

It sounds simple in theory – but unfortunately experts we spoke to thought it just wouldn’t work in practice.

First, there’s the problem of take-up. For the sums to add up, and to get the economies of scale, you need a lot of people to pay the optional £8,000. For example, more women than men end up needing residential care, so if too few men paid into the scheme, that could leave a funding black hole.

But as we found earlier this week, if insurance of this kind is voluntary not compulsory, many people don’t bother taking it out.

Stephen Lowe of Age Concern fears that, because only the neediest tend to take up such insurance, there may not be enough money in the pot to pay out.

Private insurance policies of the type the Conservatives propose are available, but haven’t been a hit with retirees so far. Only around 33,000 have ever been sold, and only one is still on the market, according to independent care fees advisers NHFA.

Second, there’s the issue of how much that guaranteed care could end up costing. A private care home works out dearer than a state-funded one, and those in the south east tend to cost more than the average £25,000 a year.

So if the policy was to work, there would need to be some hefty exclusion policies to make the figures add up.

An NHFA spokesperson said: “You don’t want to have to go to someone, when they’re in their eighties, and tell them that you need more money for something you said would be covered.”

Experts we spoke to including NHFA and Age Concern cast serious doubt on the financial viability of the Tory plan.

However, a Conservative spokesman said their figures were based on the evidence of actuaries and the plan was supported by insurers. He pointed to evidence from countries such as France, which had seen a 20 per cent take-up of similar schemes.

The spokesman did acknowledge the market had failed to make a success of this type of insurance to date, but said the party believed a future government could kick-start it.

Cathy Newman’s verdict

There are justifiable concerns about whether the Conservatives’ one-off insurance premium would work. The biggest worry is the uncertainty over whether people would buy into a voluntary scheme in sufficient numbers to pay for it.

The din about the death tax – and the ensuing row over the failure of cross-party talks – has drowned out questions about a policy that, despite the tightening of the polls, remains the most likely to be enacted after the election.