Personal Pension  

Gov’t urged to consider Isa for long-term care

Speaking as the government unveiled a 111-page consultation on reforms set out by the Dilnot Commission in July 2011, Ms Altmann argued that many people would need their pension just to cover their basic retirement income.

She added: “For most middle-income groups, pensions cannot cope with care costs. A cap on costs is welcomed but is set so high that most will still end up paying for all their care.”

In the consultation the department for health has proposed the introduction of deferred payment arrangements, as well as insurance or ‘extended pension options’, to help people fund the cost of care.

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The consultation will also look at how advice can help people make informed decisions on care.

The government is set to establish a care funding cap of £72,000, but Ms Altmann said this would only cover a basic level of care and excluded typical accommodation costs of £12,000 a year.

She urged the government to consider creating ‘care Isas’ to provide tax incentives to save towards long-term care.

Ms Altmann also argued that the cap, set to be introduced in 2015, would not help those already having difficulty paying for care.

Steve Lowe, director of retirement income provider Just Retirement, welcomed the consultation’s emphasis on the role of financial advice. He said: “It is our view that this should go further and professional regulated financial advice should be part of all self-funded care planning, including proposed council-run schemes that may affect people’s homes.”

Adviser comment
Lorreine Kennedy, head of care fee planning for Hertfordshire-based CareMatters, said: “People should not rely on pensions to fund long-term care. They are barely saving enough as it is. However a special care Isa would only be used by the wealthy or those who have seen their own parents fall into financial difficulties due to a care funding crisis. What might work better is a compulsory national insurance payment, with contributions coming out of your pay packet like auto-enrolment.”

Key points:

£72,000 – government cap on care costs from 2015

£35,000 – cap suggested in the Dilnot report.

24 per cent – self-funders forced to rely on state funding after exhausting their resources

43 per cent – amount of people in 2012 who paid the full cost of their fees