The Government is considering launching a “Care Isa” which would be exempt from inheritance tax, in an effort to solve the country’s social care crisis.

At present, Isas are taxed at death, so people are incentivised to spend their savings as opposed to keeping them to fund their care, which is often needed at the very end of their life.

The Treasury has been reviewing proposals to include the Care Isa in the Government’s upcoming social care Green Paper, The Telegraph can reveal.

Under the proposals, Care Isas would be capped to reflect care costs and any amount unspent could be passed on to the holder’s family when they die.

It comes as exclusive figures reveal that more than 4.3 million people over 70 have an average of £40,000 in Isa wealth. By comparison, the average amount held in cash Isas provided by NS&I is £11,886 across all age groups.

An estimate by Mark Dampier, the research director at Hargreaves Landsdowne, found that if a 30-year-old with an annual salary of around £50,000 saved £100 a month into an Isa with a growing interest rate of 5 per cent, they could expect to have an estimated £109,368 at the age of 70.