Unproven reports are circulating that suggest that elderly Britons may be forced to pay a £12,000 ‘inheritance levy’ to help fund old age care.

The Department of Health will soon release a green paper discussing options for elderly care in the future. This will include a proposal for a one-off fee paid on retirement or deducted from the estates of elderly after they die.

Currently, anyone with savings above £22,250 has to pay for care but the discussion paper will set out reforms to meet the growing cost of care as well as the growth in elderly population.

The system could address some people's concerns that their entire savings are at risk of being wiped out by the system, should they enter into a home for a potentially lengthy period of time. A nursing home place costs an average of £600 per month and bills quickly mount up, often leaving older people's finances exposed. But by paying the one-off fee of £12,000, older people could be assured that that is all they would be required to pay, regardless of the length of time they are in a home for.

There are problems in this suggestion. There would need to be a tax incentive to pay the fee at retirement. Who will pay for the care? What happens if there is more money being paid out than is coming in - would the fund go bankrupt?

A more basic problem is that a levy applies to everyone. If it is voluntary it is not a levy. If it is something that pays out on an event happening,  ie the need to pay fees, then technically it is an insurance policy. As an insurance policy the provider would have to an insurance company or other such body.

I cannot see the FSA allowing any government to argue that a ‘levy/ fee’ is not an insurance policy and as such is as much subject to the regulations as any insurance company.

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