Home, sweet home: and how to save it

The Tories say they have plans to protect granny's house if she has to have long-term care. Will they work? By Clifford German

Q: Long-term care. What's all the fuss about?

A: Tory party grassroots have reported back to Central Office that the threat of having homes and savings seized and sold to pay for granny's last few years in a nursing home is one of the biggest causes of dissatisfaction with the Government. It is an important part of the missing feelgood factor.

Q: How many people are affected and how much does care cost?

A: It can cost anything from pounds 5,000 a year to provide some professional care at home, pounds 15,000 to pounds 25,000 per person to live in a residential home, and another pounds 10,000 on top of that for a nursing home with 24-hour care. Few old people or their families can pay that kind of money out of income.

Q: So who allowed the situation to develop like this?

A: It was another of those unforeseen consequences of the ageing of the population, combined with the Government's attempt to hold down public sector spending. Local authorities have been made responsible for funding the care of elderly people in their area, but their spending powers have been capped. More and more authorities have been demanding a legal charge on the assets of elderly people before letting them into local authority homes - and because many old people are asset-rich but income-poor, the house that the family expected to inherit is the obvious target.

Q: But I thought the Chancellor took care of the problem in the Budget last year.

A: He increased the assets that elderly people can keep and still claim financial support. Old people can claim some support when they are down to their last pounds 16,000, and full support if they have pounds 10,000 or less, but that hardly stops the family home being sold.

Q: But don't insurance companies offer policies to cover the cost of care?

A: They do indeed. But a 65-year-old man would have to pay a single premium of more than pounds 5,000 or pounds 60 a month to insure a payment of pounds 12,000 a year to help pay for long-term care. A woman would have to pay more than pounds 7,500 or pounds 75 a month for the same cover. And only one in four 65-year-olds will actually qualify for financial help by failing two or three of the six standard tests of being able to look after themselves. Only one in six will need to go into a home, but if they do, it is an expensive business.

Premiums for starting a policy also rise with age and can easily be double for an 80-year-old. These policies pay for unlimited care, but only relatively wealthy pensioners can afford these premiums.

Q: Is it not possible to get limited cover?

A: That would mean the risk of people being evicted once they ran out of insurance money. No way, Jose.

Q: So what is the Government planning to do about it?

A: The Prime Minister told the Tory faithful in Harrogate last weekend that he is in favour of some form of partnership, which would allow people who take out private insurance to provide a limited amount of cover in future to keep a larger amount of assets and to claim on the state once the insurance has run out.

Q: How would it work?

A: A consultation document is due out after Easter with a range of options and recommendations. One option was to guarantee anyone who took out insurance to cover three years costs would then be supported wholly by the state. But that could still be too expensive for most ordinary people.

Another alternative would be to provide state support to allow pensioners to keep pounds 1 worth of assets for every pounds 1 worth of benefit they insured privately. But anything over pounds 40,000 of benefit would be too expensive and still not protect the average family home. The latest thinking is that the Government would allow pounds 40,000 worth of private insurance to protect pounds 60,000 worth of assets, before the state steps in.

Q: Will the new system be cheaper and will it solve the problems?

A: New-style policies offering state back-up would cost maybe 70 per cent of premiums on existing policies, but the cost of insuring say pounds 90,000 of assets would cost as much as most existing policies. State help would only pay for standard, not for luxury care and accomodation. But it is a step in the right direction.