Building a more financially resilient society
By encouraging individuals to take more personal responsibility for their own and their family's financial security, we can help construct a society that is less dependent on the welfare state, says the Association of British Insurers.
Long-term care affects us all. It is highly likely that many of us will require some form of special assistance later in life, when through frailty or disability, we find it increasingly difficult to carry out normal daily activities such as eating, dressing and shopping. Even those fortunate enough not to need this support will almost certainly know someone in their family or circle of friends who does.
The fact that we are living longer is one of the great achievements of the last century. However, this is placing new pressure on society to meet the additional costs of an ageing population. The state alone cannot pay the bills involved. The average cost of care in a residential home is £25,000 a year. This rises to nearly £39,000 per annum when nursing is required. Despite this potential future expenditure, most people are failing to plan ahead for the full range of needs they may have in retirement.
What contribution can the insurance sector make?
1) We need to help people better prepare. We are developing policies and actively engaging with key stakeholders to promote the importance of building a more financially resilient society. The insurance industry is uniquely placed to relieve some of the burdens on the state by providing savings and insurance protection products that help people plan for retirement and any unexpected events that may result in a loss of income. By encouraging individuals to take more personal responsibility for their own and their family's financial security we can help construct a society that is less dependent on the welfare state.
2) The ABI supports the recommendations by the Dilnot Commission as a framework for a sustainable solution to funding long-term care. It is essential that MPs from all parties work towards a sustainable settlement and that the issue is not put on the shelf. There needs to be clarity over the respective contributions which government and individuals will be expected to pay. Once this framework is in place, insurers can develop the necessary financial products to enable a person to cover their share of care costs.
3) Most importantly, we need to get people saving. Around half the population are either not saving in a pension at all or are not saving enough for a decent retirement income. The ABI is therefore a strong supporter of automatic enrolment into workplace pension savings, starting from 2012. It will be a social revolution for retirement savings, the importance of which is hard to underestimate.
Insurers are ready to work in partnership with government and other key stakeholders to ensure Britain is a resilient society. We will continue to explore ways the private sector can fill the gap between people's protection needs and the services offered by the state.
Throughout recess, ePolitix.com will be focusing on a different policy theme each week. This week we are featuring articles with a focus on health and social care.
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