How Can The Government Proposals Be Made More Attractive?

I believe there are several ways in which these schemes could be made more attractive both to elderly people and to potential plan providers.

1) I think the most important concerns MIRAS; the current loan limit was raised 13 years ago to £30,000 and I suggest that for home income plans, it should now be raised to at least £60,000 and serious consideration should be given to an even higher figure. This would not affect the position of funding for LTC protection alone as the £30,000 limit is normally sufficient for this purpose up to £100,000 or so; above this level the LTC protection may be bought more effectively on a lifetime basis. However, using the plan to fund LTC and provide an income would make the mortgage schemes much more attractive and more comparable with reversion plans. For example, with a £100,000 property and a mortgage of £60,000, the income for a 75 year old lady would be £1,888 p.a. and she would have an LTC policy of £20,000 to protect the balance of her property of £40,000 (that's £30,000 + £10,000). The benefit with a £30,000 loan limit is a mere £55 p.a. income and a £40,000 LTC policy. In my view the Government should give particular attention to improving MIRAS tax relief and there is a good reason for this. There have, in the past, been restrictions on financing equity release schemes and undoubtedly they still exist today. The public and institutions are far more familiar with mortgages than reversions, and, therefore improving the benefits available under mortgage schemes is likely to be an effective way of stimulating the market for equity release plans and in turn arrangement of long term care policies.

2) In order to remove the one remaining variable in the mortgage/annuity schemes, the MIRAS tax relief rate should be fixed at 25% for these schemes; this would give additional confidence to elderly people.

3) The level of protection of £1.50 for each £1.00 of LTC cover could be raised to £2.00 for each £1.00 of LTC cover. This would immediately expand the attractiveness of the plan to potentially a quarter more people because the LTC requirement will be a quarter less.

4) Serious consideration should be given to exempting annuity income arising from equity release schemes from income tax i.e. treating these annuities as pure return of capital.

5) Benefits from equity release schemes should not be included when assessing entitlement to Income Support and Council Tax Benefits.