Pensions expert Ros Altmann has suggested the elderly are allowed to pay the government’s £20,000 death tax from their pension fund, in order to fund their long-term care.
Labour has denied a Conservative party claim that it is planning to unveil a £20,000 flat tax payable on death in this year’s budget, tipped to be on the 24 March but the Department of Health has proposed deducting 10% from an individual’s estates at the end of their life to prevent forcing elderly people to sell their homes to pay for care.
Altmann believes there is a better solution than those attributed to the government and DoH which would involve those who need care paying for it now, rather than at the end of their lives.
‘I like the idea of people using their pension savings to fund care if they need it. For example, if you have £20,000 in a pension and have taken a drawdown approach, or even if you have taken an annuity perhaps. You will start receiving an income from the pension fund, but if you then need to go into care and have not used up the whole fund, you could use the rest of the value of your pension fund to pay for care. I believe this would help ensure better funding rather than having the balance of the pension fund pass onto one’s estate or go to the insurance company,’ said Altmann
The long term care of the elderly is set to become an increasingly urgent issue as the babyboomer generation moves into old age. In 2025, there will be more people over 70 than under 40 in the UK.
John Lawson, head of pensions at Standard Life, also thinks it might be better to cover costs sooner rather than later.
‘The problem for the future is how to fund long term care. Many people have to sell their house to pay for care, so what you have here is a search for a better solution…If you spread insurance over a life span then the average cost is much less. The other alternative is to pay up front. So when you some one reaches 65 they pay £20,000 to cover long term care, or a voluntary insurance scheme where you can pay £20,000 if you think there is a high chance you will need care…The question is really whether you wan to pay for it upfront,’ he said.
Alex Henderson, partner at PricewaterhouseCoopers, says while he applauds the effort to tackle to problem, current proposals haven’t yet reached the solution.
This is where MPs should be getting their ieads from, which is listening to those who really understand like Ros Altmann.
Well done Ros.
Reassuring to see that the best financial brains are unable to solve the question of Long Term Care.
If this means paying „up front” to HMG like other well known gov’t schemes (such as SERPS, S2P, NI „savings” etc) then I’m „dead” against it.
HMG’s record of taking „up front” monies based on a political promise of future benefits is there for all to see.
If you trust this scheme, no doubt by the time you need it there will be all sorts of if’s but’s and maybe’s as to whether the cover you anticipate will actually resemble anything HMG has in mind as and when it gets to a claim.
Read the article on CityWire.co.uk
Let elderly pay ‘death tax’ from their pension pot, says Altmann
Pensions expert Ros Altmann has suggested the elderly are allowed to pay the government’s £20,000 death tax from their pension fund, in order to fund their long-term care.
Labour has denied a Conservative party claim that it is planning to unveil a £20,000 flat tax payable on death in this year’s budget, tipped to be on the 24 March but the Department of Health has proposed deducting 10% from an individual’s estates at the end of their life to prevent forcing elderly people to sell their homes to pay for care.
Altmann believes there is a better solution than those attributed to the government and DoH which would involve those who need care paying for it now, rather than at the end of their lives.
‘I like the idea of people using their pension savings to fund care if they need it. For example, if you have £20,000 in a pension and have taken a drawdown approach, or even if you have taken an annuity perhaps. You will start receiving an income from the pension fund, but if you then need to go into care and have not used up the whole fund, you could use the rest of the value of your pension fund to pay for care. I believe this would help ensure better funding rather than having the balance of the pension fund pass onto one’s estate or go to the insurance company,’ said Altmann
The long term care of the elderly is set to become an increasingly urgent issue as the babyboomer generation moves into old age. In 2025, there will be more people over 70 than under 40 in the UK.
John Lawson, head of pensions at Standard Life, also thinks it might be better to cover costs sooner rather than later.
‘The problem for the future is how to fund long term care. Many people have to sell their house to pay for care, so what you have here is a search for a better solution…If you spread insurance over a life span then the average cost is much less. The other alternative is to pay up front. So when you some one reaches 65 they pay £20,000 to cover long term care, or a voluntary insurance scheme where you can pay £20,000 if you think there is a high chance you will need care…The question is really whether you wan to pay for it upfront,’ he said.
Alex Henderson, partner at PricewaterhouseCoopers, says while he applauds the effort to tackle to problem, current proposals haven’t yet reached the solution.
This is where MPs should be getting their ieads from, which is listening to those who really understand like Ros Altmann.
Well done Ros.
Reassuring to see that the best financial brains are unable to solve the question of Long Term Care.
If this means paying „up front” to HMG like other well known gov’t schemes (such as SERPS, S2P, NI „savings” etc) then I’m „dead” against it.
HMG’s record of taking „up front” monies based on a political promise of future benefits is there for all to see.
If you trust this scheme, no doubt by the time you need it there will be all sorts of if’s but’s and maybe’s as to whether the cover you anticipate will actually resemble anything HMG has in mind as and when it gets to a claim.
