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Social care funding needs prompt buy-to-let demand

There has been increased demand for buy-to-let products among those looking to fund social care, according to Retirement Advantage’s Alice Watson.

The head of product and marketing at Retirement Advantage said the delays which had plagued government action on social care funding meant the company had not been able to dedicate resources to exploring new products to address this issue.

But she said Retirement Advantage’s clients had been using its buy-to-let product to fund social care as an interim solution.

Ms Watson said: “Say you have had a homeowner who has just moved into long-term care and the family cannot afford it, because it is really expensive. They can put tenants into the property, rent it and release money from us.

“They are still getting that monthly income from the tenants so they have got the capital and the monthly income.”

Retirement Advantage currently offers two over-55 buy-to-let products which offer annual interest rates of 6.16 per cent and 6.36 per cent.

The Department of Health & Social Care had been due to publish a green paper on the funding of social care last year but it has been delayed several times and is now expected in the autumn.

This was just the latest delay to hit the government’s policy on social care funding, with a proposed cap on the cost of care due to come into effect in 2016 but delayed until 2020 because it would have been too expensive.

The cap may be revived as part of the government’s green paper but a number of other proposals have been floated, including an auto-enrolment solution which would see adults saving into a national fund to cover their care costs later in life, a Care Isa savings product exempt from inheritance tax, and a care pension, which mixes drawdown and care insurance.

Ms Watson said: “We wouldn’t look to invest too much in creating social care products at the moment because if we were to spend X months developing it the government could undercut it.

“Care needs to be funded in a slightly different way from many points of view. You need a really flexible product.”

She said flexibility was important because people’s care needs could change suddenly and dramatically over time.

Source: FT Adviser