A new report from consultancy LCP has set out a radical solution to the social care funding issue which is currently at the top of the political agenda.
Drafts of the report have already been shared with key figures in government and opposition, which LCP says "has generated considerable interest".
The proposal builds on the precedent of automatic enrolment into workplace pensions, which has brought more than 11 million people into pension saving since 2012.
Under the new plan, all taxpayers aged 40 or over – including pensioners – would be automatically enrolled into paying a social care premium equivalent to 1p on the basic rate of income tax. The maximum premium would therefore be just over £30 per month. But they would be entirely free to opt out.
Those who remained in the scheme would build up a discount on their future social care costs such that those who paid in over a 25 year period would be entitled to entirely free personal social care. But discounts would start as soon as people had one year in the system getting a 4% discount, those with two years an 8% discount and so forth.
1 in 7 people are projected to need to spend more than £100,000 on care costs over their lifetime. LCP says this scheme would enable people to protect the value of their family home and life savings against these risks for the first time.
In addition, the scheme would generate substantial up front revenue for the government. The report estimates that, even making cautious assumptions about opt out rates, the new social care premium could raise around £3.5bn per year.
Report co-author and former pensions minister, Steve Webb, 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. We have already had a very warm response to these ideas as we have discussed them, and hope that they might form a useful approach for consideration as part of all-party discussions.”
Report co-author and head of LCP Health, Dr Jonathan Pearson-Stuttard, added: "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."
