Social care  

Lib Dems offer support to care pension proposal

Lib Dems offer support to care pension proposal

The Liberal Democrat pension spokesman has written to government ministers calling for the introduction of a "care pension".

Stephen Lloyd, the MP for Eastbourne, has offered his support to the idea first proposed by Royal London and has called on the government to act to help the industry develop such a product.

Royal London floated the idea of a new financial product mixing drawdown and care insurance, earlier this week as a potential solution for the long-term care funding problem.

Mr Lloyd, who is also Lib Dem’s frontbench spokesman for Work and Pensions, has written to secretary of state for Health, Jeremy Hunt, asking him to work on this, and to the secretary of state for Work and Pensions, Esther McVey, asking her to draft legislation to allow a favourable tax treatment to this new product.

He said: "I have been following the proposals from people in the industry to create a care pension.

"[Prime minister] Theresa May has a real problem with coming up with sensible proposals to pay for adult social care, as we saw in the 2017 general election campaign.

"Given the importance of the issue I have spent some time looking at remedies. The industry proposal for a care pension strikes me as very interesting.

"The first step to building a system of adult social care that works for all parties, is for the conservative government to stop penalising people who want to do the right thing and prepare in advance for their care needs."

The new product would have a structure "where the policy holder commits to pay a regular insurance premium directly from the drawdown account to the product provider".

In return for this, the product provider would guarantee to pay a certain amount into a 'care account' in the event that an individual had care needs above a certain threshold.

Money from this care account could be used to pay for approved care costs in line with the wishes of the policyholder, Royal London stated.

At present, money taken out of pension saving is generally taxable apart from a 25 per cent tax-free lump sum.

Under Royal London's proposal, the money would leave the drawdown account but go direct to the insurer and would not be taxed.

Money paid into the care account and then used to pay care providers would similarly not be taxed.

The government announced in December that the £72,500 cap on social care will be scrapped.

Health minister Jackie Doyle-Price told the Parliament that the government would not be "taking forward the previous government's plans to implement a cap on care costs in 2020".

Instead, there will be a process of "initial engagement over the coming months" to define the long-term reforms, which will be set out in a green paper due to be published in 2018.