Using Housing Wealth To Fund Long Term Care

Submitted on 29th July 2015

A report published by the Institute and Faculty of Actuaries in November 2011 entitled Responding to the Dilnot Commission: Information Gathering Regarding Long Term Care in Ten Countries presents a chart comparing the extent of funding of long term care (LTC) for the ten countries reviewed. At one extreme is Norway, with a comprehensive system financed by the state from taxation. At the other end of the spectrum is Germany, which uses a compulsory funded national insurance system to deliver a comprehensive system of universal care. The remaining countries lie in between these two extremes, with a combination of state provision, self-funding and private insurance. If implemented, the recommendations of the Dilnot Commission, which apply to England, would remove some of the uncertainty associated with the expenses an individual could be expected to self-fund. There would be a lifetime cap on the amount that an individual could pay for care expenses and an annual limit on the contribution an individual would be required to pay for general living costs. Moreover, eligible expenses would be well defined.

Various reports have recommended that England provide a better organised system of LTC provision, but they have not been implemented because they have been judged too costly, among reasons given. Moreover, there is considerable housing wealth held by the population, especially those age 55 and up. Issues of inter-generational fairness have been raised against expanding state provision for LTC, instead of requiring this generation to use some of its housing wealth.

This paper outlines how housing wealth might be released to help fund LTC costs, while the LTC recipients were able to remain living in their own homes. It will refer to previous work on home-equity release by the author and to a discussion paper by the International Longevity Centre UK entitled A National Care Fund for Long-Term Care that incorporates property wealth in the financing of LTC.

This research paper outlines the public-private partnership (PPP) model developed for the GAVI Alliance (GAVI) and its financing through the International Finance Facility for Immunisation (IFFIm) and suggests how elements of that model might be incorporated in a PPP approach to LTC. Whereas the IFFIm approach securitises government commitments to provide cash for immunisations, this paper shows how property of those requiring LTC could be securitised to unlock home equity and support their LTC requirements. The Dilnot recommendations would provide a useful framework to facilitate such an approach. Moreover, just as the securities created by the IFFIm are able to be sold at a lower yield because of their socially responsible characteristics, so might the securities described herein be considered socially responsible and sold at a lower yield. A longevity swap might further enhance the product.

International Actuarial Association
Length of Resource
Resource File
Doug Andrews
Date Published
Publication Type
Resource Type