Who pays for care?
Somehow we have to face it: we are all living longer and the care we are going to need in old age is expensive.
According to the government, more than 50 per cent of over-65-year-olds will need care costing £25,000; 20 per cent will need care costing less than £1,000 and another 20 per cent will need care costing more than £50,000.
And the government is not going to pay for it - under current rules, anyone with assets worth more than £23,500 will receive no financial help from the state.
Politicians have already admitted this is unfair, labelling the system a "cruel lottery": while the NHS will fund the treatment of cancer sufferers, someone with Alzheimer's could have to pay up to £200,000.
Sarah Routledge examines the government's proposals to overhaul the rules and create a 'National Care Service' and looks at what options are already available.
Age Concern and Help the Aged charity director, Michelle Mitchell, says: "All political parties and the public must now look beyond the short term squeeze on our national finances to agree a fairer way to pay for care.
"High quality care must be available to all who need it regardless of where they live and whether they are rich or poor."
The government's recently published green paper Shaping the Future of Care Together proposes how to tackle the problem of funding this care.
Taxing decision
Perhaps the simplest way to fund care in old age would be to pay tax throughout a working life, with the money used to pay for those who currently need care, as the NHS or the pension system is funded.
This would spread the cost over a lifetime, and would allow everyone to get some basic care for free.
Unsurprisingly, this is the favoured option for the over 50s.
In a survey from Saga, 51 per cent of over 50s questioned said they were in favour of a system that would see the government provide a set standard of care for everybody, regardless of where they live, and which could be topped up by the individual if they wish.
However, the costs for those of working age would inevitably be high, and this would mean higher taxes at a time when the recession is already squeezing household budgets.
As a consequence, this system has been ruled out because of the "heavy burden placed on people of working age".
On the other hand, the green paper has also ruled out making the individual pay for all of their care.
Instead, the government is proposing three models.
Partnership
The first model is one of partnership. The state would pay for a set proportion of care costs - around a third or a quarter - with the individual paying the rest.
According to the government, a 65-year-old in England will need care that costs on average £30,000 during their retirement, so someone who got the basic offer of a third or a quarter paid might need to pay around £20,000 or £22,500.
The less well off would still get their care free, while the rich would have to pay more - but everyone would get some proportion of their care paid for, which would help those who are facing particularly high bills.
However, the model does not offer any answers on how the individual will find the money to pay for their share of costs - which could end up far higher than £20,000.
Insurance
In this system, everyone would have some proportion of the costs met, like the partnership model.
But there would be the added option of taking out an insurance policy to meet their own side of the costs. This would be voluntary, and could either be provided by the insurance insustry or in a state-backed scheme.
The average cost of such a policy would be around £20,000 to £25,000, the government believes - compared to the average cost of care for a 65-year-old, which is £30,000.
Although many would still struggle to afford this, payments could be spread out before or after retirement, or after their death from their estate. And it would at least cap the cost of care for individuals.
Comprehensive
Finally, and probably most controversially, the comprehensive model.
In this system, everyone over retirement age who can afford to would be required to pay into a state insurance scheme.
It would cost £17,000 to £20,000 and could be paid either as a lump sum on retirement, before retirement or after death out of the proceeds of the estate.
This would mean that everybody will have to pay a significant sum toward the cost of care, even if they require little or none themselves.
What to do now
All of these options will help individuals to cover the basic cost of care, but the government has admitted the calculations do not include accommodation because "we would expect people to pay for their own food and lodging whether or not they were in a care home".
If you cannot wait for reform, or if you want to plan for something more than basic care, it makes sense to plan ahead and consider the financial products that already exist to help people pay for their care.
Equity release
Andrea Rozario, director general of SHIP, the equity release trade body, says: "In setting out possible options for funding, the paper does not specifically consider the use of existing housing wealth to assist in this.
"We believe that, with people over 65 having unmortgaged housing wealth of approaching £700 billion, means can be found to safely bring this to bear on at least part of the challenge, and hope to be able to work with government to achieve this."
Equity release can be expensive and if you use it up early on may leave you with nothing when you need it later, and is not ideal for everyone.
But this product is becoming more flexible and is certainly an alternative to selling your house.
Annuities
Ian Owen, chairman of Partnership, says: "The green paper only seems to acknowledge existing insurance-based products as an after thought, whereas we think they have a crucial role to play in addressing the care challenge resulting from the UK's ageing population."
An immediate needs annuity policy is bought when you, or a relative, is about to go into a care home.
The annuity is paid directly to the care provider for the life of the individual gross of tax.
These annuities are usually bought with a single lump sum payment.
"In this way, individuals can take responsibility for themselves and choose the level of care they need. This provides certainty of inheritance for their family as well," Mr Owen adds.
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