The Dilnot report mustn’t be kicked into the long grass, argues Peter Welch, head of sales and distribution at Bridgewater Equity Release
The Dilnot report on the future funding of social care in this country certainly hit the spot (albeit perhaps only momentarily) in terms of pushing the issue out of the personal finance pages in the media and out to a wider, more mainstream audience. For that we should be grateful, given that this is one considerable issue which requires some fresh thinking if we are to have a sustainable and operational solution in the years ahead.
You might think that the equity release sector was slightly muted in its response to it, however, this is understandable given that (as always) the devil is in the detail when it comes to, firstly, whether the government will actually adopt any of the recommendations, and secondly, how equity release might figure in any future funding solution.
The fact is that while some government operators were suggesting they would look particularly favourably on the Dilnot report, the reality is that we are taking about a considerable extra expense for the State in order to support the proposals fully. Huge questions remain about the government’s appetite and ability to sign this considerable cheque, especially at a time when the coffers are not exactly over-flowing and there may be arguments about making such financial commitments when there are such swingeing austerity cuts being made right across the board.
In a way it is perhaps not the greatest timing for Dilnot in terms of seeking acceptance of his Commission’s suggested reforms, but one might also say that if not now, then when? For far too long this has been an issue that has been (quite effectively I might add) swept under the carpet by successive governments, to such an extent where we are hovering at the edge of the precipice in terms of our ability to continue funding social care.
If something isn’t done now then a status quo non-decision will undoubtedly make the situation far worse, particularly as there is no sign that adult life longevity is going to slow down and the UK continues to morph into a rapidly ageing population.
It seems to make sense to us that Dilnot accepts that the marriage between state and individual responsibility leaves people open to fund their care in a variety of ways – equity release being one such method. This should certainly mean that the financial product working group proposed by the report, to look at the ways in which individual responsibility can be paid for, should be ‘well stocked’ with equity release advocates and there should be a full review of its place in the market.
Now, while other ‘juicier’ stories may have pushed the report from the front pages it is absolutely vital that we develop the issue amongst the wider public, whether the recommendations are accepted or not. From an equity release point of view this means that advisers and providers must continue their good work in terms of education to the masses. This is not even a debate which should only be had with those in, or reaching, retirement we need to have the ‘how will you fund your retirement and potential care needs?’ discussion with every single client. We can be certain that the cost of care is not going to go down, neither is the cost of living for individuals when they enter retirement, therefore why should be shy away from the hard facts now?
There is, of course, a danger that – even with the publication of the report – this government could choose to do what others have done before it, and kick the issue and its potential solutions into the long grass. Even with all the positive soundings and goodwill for Dilnot, plus the pressure which is being brought to bear by charities and consumer groups, this is not an unlikely situation. When push comes to shove, if it wants to support Dilnot, then it has to find the money from somewhere and that may well be a decisive sticking point.
However, what advisers can do is make sure that the issue is on the minds of every single client and that all solutions (including equity release) are actively discussed and considered. We are still some way away from a full and frank appraisal of all product solutions by many advisers and we certainly have a duty as providers and advisers to make sure this is not the case. We must do the best that we can to ensure those who reach retirement have sufficient financial provision in order to meet their responsibilities, and we should be open to the fact that equity in people’s properties is as good a way as any of funding those needs.
