Pensions  

Lowe: give people tax-free cash for care

Lowe: give people tax-free cash for care

Annuity provider Just Retirement is lobbying the government to let people take tax-free cash from their pension if it goes straight to paying for long-term care.

Stephen Lowe, external affairs director of Just Retirement, said the proposal could help people pay for care.

He said: “When we make the payment from an immediate needs annuity to a care home we can do so without it being taxed.

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“What we hope the government might consider doing is allowing people to withdraw money untaxed if it pays for care.

“I have seen Norman Lamb, the minister for care and support, to talk to him about this.”

Demographic changes, including the fact people are living longer, and cuts to council budgets are some of the reasons it is claimed social care funding is in crisis.

The Care Act, which became law last year, introduces a lifetime cap on care costs of £72,000 from April 2016.

Independent pensions consultant Ros Altmann said she was disappointed there were no further measures to tackle the issue in this year’s Budget.

She said: “Families are not prepared for care, nor is the government, yet there is a crisis looming that could eat up the resources of many families who might have been able to put some funds away if they had known about it – and could also bankrupt the NHS.”

But pensions minister Steve Webb questioned whether there is any evidence a tax break would encourage people who weren’t previously thinking about care to do so.

He said: “I can see that there are a lot of things you could do to help, but I am not sure tax breaks would be my top priority.

“I would argue that you should integrate pensions and care products a bit more.”

Mr Webb has previously called for care and pensions to be integrated into a “department for pensions and the ageing society”.

A department of health spokesperson said: “We have given an extra £1.1bn to councils to help protect social care services this year on top of additional funding in recent years, but ultimately they are responsible for deciding how to spend their budgets.”

Adviser view

Ray Black, managing director at Lincolnshire-based Money Minder Financial Services, said: “There is no doubt in my mind that is the way it will go, but I think we need to enable people to buy long-term care annuities with their pension and pay for it tax-free.

“Most people know they will have to self-fund for their care, but I don’t think they know how they will do it.”