Julian Knight: Planning for old age? Government

Equity-release proposals vague, insensitive and more expensive than existing council schemes

There are absolutely no votes in long-term care. And if you need proof just look at the government's lame proposals in response to the Dilnot Commission's report into how on earth we pay for the millions who are going to need care in old age.

The government's scheme, as outlined by Andrew Lansley, is not that dissimilar to the status quo. The value of assets you can still have before you can qualify for free care will rise but we don't know by how much and there will be a cap on charges but again we don't know where this will sit.

The big headline grabbing measure was being able to take out a loan to pay for care which will be repaid – presumably with interest – from your estate when you die. In most cases this will mean the charge will be laid against the family home which presumably will be sold and the local authority reimbursed.

What we are effectively talking about is an equity release scheme run by civil servants and shoved on people at their most vulnerable. Individual civil servants won't want to get involved and I can see a complete advice black hole.

It's difficult to think of a system more likely to ensure a rank bad deal. Councils are already running schemes like these but interest free. The government's proposals are more expense.

However disappointing the government's moves on long term care, at least it correctly focuses on the fact that we are going to have to use our housing wealth to fund our retirement and care costs in the future.

Bearing this in mind, one idea is to get the private sector more involved with the guarantee of independent financial advice and an independent solicitor. If someone in their 70s is concerned they will eventually need long-term care, they can arrange a contract with a provider to borrow against a portion of their home. The loan should be available in small chunks and interest will accrue only when the money is drawn upon. This way the individual is in control rather than a bureaucrat.

End game

Children's Mutual has said it is looking to merge with Forester Life.

After more than 130 years the Mutual could soon be no more. Its recent story reminds me of Leeds United under chairman Peter Ridsdale, who 'lived the dream' by taking major risks to become one of Europe's biggest clubs. All seemed well for a while then came a financial crisis and the club fell through the leagues.

In the Children's Mutual's case, for Peter Ridsdale read David White, their departed chief executive. He bet the Mutual on the continuance of Gordon Brown's child trust funds (CTFs). Betting so much on a politician's scheme was never a good idea and this was proven when one of the first acts of the coalition was to ditch the CTF, destroying the Children's Mutual new revenue stream in an instant.

It looked possible the Mutual may have to be wound up but, although that has been avoided, its fall can be seen with the move to woo Forester.