LCP Proposes Opt Out Social Care Premium Scheme

Consultancy LCP has proposed a new opt out social care premium scheme aimed at addressing funding challenges in the sector, with taxpayers aged 40 and over automatically enrolled to contribute a small income tax based payment while retaining the choice to leave.

The proposal has been shared with government and opposition figures, according to LCP, which said the idea has attracted considerable interest. It follows the model of workplace pension automatic enrolment, which has brought more than 11 million people into pension saving since 2012.

Under the plan, eligible taxpayers including pensioners would pay a social care premium equivalent to 1p on the basic rate of income tax. LCP said the maximum contribution would be just over £30 per month.

According to the LCP report, participants who stay in the scheme would receive discounts on future personal social care costs. Those contributing for 25 years would qualify for entirely free personal social care, while discounts would begin after one year with a 4% reduction.

LCP estimated that one in seven people are projected to spend more than £100,000 on care costs during their lifetime. The consultancy said the scheme could help protect family homes and life savings from those expenses.

The report also estimated that the premium could generate around £3.5 billion annually for the government under cautious assumptions about opt out rates. Former pensions minister Steve Webb, a co-author of the report, said the approach could adapt a successful pension policy model to social care funding.

"Pensions automatic enrolment is a hugely successful policy which is admired around the world. There is no reason why the same approach could not be applied to the thorny problem of social care funding. At present, people are at risk of having their life savings wiped out by catastrophic care costs, and have no way of pooling this risk with other people.

This scheme, with an opt out for those who don’t want it, provides an affordable and efficient way for people to protect their savings. We have already had a very warm response to these ideas as we have discussed them, and hope that they might form a useful approach for consideration as part of all-party discussions," said Steve Webb, report co-author and former pensions minister.

LCP said the proposal is intended to create early funding for social care while supporting investment in health and independence. Dr Jonathan Pearson-Stuttard, head of LCP Health and report co-author, said the framework could shift attention toward prevention.

"Social care is one of the defining societal challenges of our time, but it is also an opportunity to do things differently. Our proposed economic framework would not only help people better meet the costs of care, but generate early funding to invest in keeping people healthier and independent for longer. Shifting our focus from treating illness to preventing it can strengthen communities, ease pressure on public services and support the health-driven prosperity on which a stronger economy depends," said Dr Jonathan Pearson-Stuttard, head of LCP Health and report co-author.