Opt-out automatic enrolment: a way out of the social care funding maze?
Pensions & benefits Health Policy & regulation
A new approach to funding social care
As the population ages, more people will need help with daily living that the NHS does not provide. Yet social care costs can be unpredictable, with around 1 in 7 people expected to face lifetime care costs of more than £100,000.
This paper explores a new opt-out automatic enrolment model that could help people protect themselves against catastrophic care costs. It is also projected to generate funding for preventative measures that help people stay healthier and independent for longer, reducing the extent of social care support needed later in life.
Opt-out automatic enrolment: a way out of the social care funding maze?
Read nowScroll down for a high-level overview of our social care insurance model
How would our social insurance model work?
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Age at which taxpayers would be automatically enrolled
40+ -
Premium on the basic rate of income tax
1% -
To build up entitlement to fully funded personal care
25 years
Our proposal builds on the success of workplace pensions automatic enrolment, which has brought more than 11 million people into pension saving since 2012.
Taxpayers aged 40 and over would be automatically enrolled into paying a social care premium equivalent to an additional 1% on the basic rate of income tax. The maximum premium would be just over £30 per month.
Each year of contributions would increase the discount applied to their personal care costs, rising to fully funded personal care after 25 years in the scheme.
Participation would remain entirely voluntary, with individuals free to opt out at any time.
What are the opportunities?
The report estimates that even cautious assumptions about opt-out rates, the new social care premium could raise around £3.5bn per year, which can be used in a variety of ways.
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Currently, people in England cannot get any help with their care costs if they have assets of more than £23,250. The report suggests raising this cut-off immediately to £100,000.
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The funding could support interventions that help people living with care needs at home now, including falls prevention, home adaptations and better support for unpaid carers. It could also reduce future social care demand by improving access to mental health treatment or obesity prevention.
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The additional revenue could form part of the introduction of a national care service, providing additional revenue without the need for controversial new taxes. This could help bridge the gap between savings from changes to the state pension triple lock and the higher cost of plans for free social care.
