The Liberal Democrats have formally ditched their policy of free social care in England. The party has opted instead for a co-payment system based on the one set out by Sir Derek Wanless for the King's Fund.

Leader Nick Clegg said the system would "guarantee older people payment to cover the great majority of the care they need".

"Top-ups [from] private contributions will be matched by the state until the maximum benchmark is reached," he said. At the last general election the party promised free personal care for all, but has stepped back from the pledge after deciding it was unaffordable.

Sir Derek set out his model in 2006. He estimated an improved minimum package available for all would cost an extra£4.3bn a year, but up to£3.7bn of that could be found by redistributing benefits such as disability living allowances, which are automatically paid to around 1.5 million disabled over-65s. HSJ has been told the government has been examining his proposals and is preparing to launch a consultation in mid-May, followed by a green paper.

The Liberal Democrat announcement follows an NHS Confederation paper examining the merits of a compulsory insurance model to meet the increased demands on the social care system. Policy director Nigel Edwards said the present funding system was unsustainable and under the current means-tested model not everyone who needed state social care got it.