Central government has extended the ability of local councils to increase council tax to meet the burgeoning cost of social care.
Steven Cameron, pensions director at Aegon, said the current care cost crisis should be a wake-up call to younger generations.
He said: "With people living longer, the government will find it increasingly challenging to cover care costs.
"While tackling today’s funding shortfall is critical, we also need ways of rewarding and encouraging younger generations to plan ahead to cover the growing personal contribution they’ll be expected to make. Otherwise, today’s care crisis will become tomorrow’s care catastrophe."
He added the government plans to cap how much any individual would pay towards their care were put on hold until 2020.
"But unless individuals know in advance how much they’ll be asked to contribute, they can’t plan ahead. The longer the government delays, the greater the future challenge.
“For an increasing number, paying for social care will be a substantial part of their spending in retirement. For those planning ahead, saving through pensions offers the best solution.
Mr Cameron said from age 55 onwards, individuals can now take as little or as much as they like out of their pension and tax rules, which used to penalise those who left large pension funds on death have been made fairer.
"Together, these changes mean pensions are now well suited to fund not just typical retirement years but also social care if needed in later years.
“But the government recently cut the total amount that can be built up in a pension to £1m. While this seem high, it might generate an income of around £25,000 a year before tax, which is less than the cost of social care. As part of an approach to encourage greater self-funding of social care, the government needs to scrap the pension lifetime allowance.”
ruth.gillbe@ft.com
