The Institute and Faculty of Actuaries (IFoA) has raised concerns around new reforms to social care funding in the UK, and temporarily scrapping the pensions triple lock.
Prime minister Boris Johnson yesterday unveiled additional funding for social care through a 1.25% increase to both National Insurance contributions and share dividends from April 2022.
This will be paid by all working adults, including older workers, which will be "legally ring-fenced" to go only towards health and social care costs.
The Institute for Fiscal Studies said that a levy of 1.25% on employee earnings and employer wage costs will raise £14bn a year, with £5.4bn provided to adult social care services over three years.
A cap of £86,000 will be introduced on care costs in England from October 2023, while all people with assets worth less than £20,000 will then have their care fully covered by the state.
IFoA president Louise Pryor welcomed the additional funding for social care – which has been in desperate need of reform for decades – but said that further examination of the details is needed.
“Last week, the IFoA called on the government to produce a clear strategy for tackling the social care funding crisis in both the short and the long term, in a way that is sustainable and intergenerationally fair,” she said.
“The additional funding will provide much-needed support to a sector long in crisis. However, it raises questions about whether the burden is being shared fairly across the generations.
“We will look closely at the detail behind the proposed new levels of the cap on costs and capital floor on assets to understand their impacts on those requiring care and on wider society.
“We will ensure the actuarial voice on these reforms is heard as the government seeks input from experts in professional bodies and the financial services sector, and through the expected white paper on health and care integration later this year.”
The government also confirmed yesterday that it would suspend the pensions 'triple lock' for the 2022-23 financial year, and that state pension increases will instead rise by the consumer inflation rate or 2.5%.
This comes after concerns were raised that next year's increase could have been in excess of 8% as the economy bounces back from the impact of COVID-19 and wages rise.
“We understand the current focus on addressing a one-off distortion of the triple lock for pensions comes as a result of COVID-19,” Pryor said. “However, we believe that this should not divert attention away from the need for a longer-term reform to embed fairness for all generations.
“Irrespective of immediate measures to address COVID-19 anomalies, it remains crucial as today’s workers become tomorrow’s pensioners, that the state pension remains fair and sustainable over the long term.”
Image credit: iStock
Author: Chris Seekings