Pensions could be used to supplement care home costs

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Several changes to funding of care of the elderly in the UK have been announced. These changes aim to ease the pressure on the pensioners living in residential care or who need care but remain at home. The changes include the introduction of a cap on care home fees which will come into effect in 2016 and a wider availability of loans from local authorities to fund care.

The threshold for financial assistance will be raised as well. By 2017 you’ll be allowed personal assets of up to £123,000 and still qualify for some state-funded contributions toward the cost of your care. That’s a massive increase from the current limit of just £23,250 in England. This should make funding allocations a lot fairer on elderly citizens whose assets would be greatly stretched if they had to face all payments themselves.

Private pension pots

In addition to state funding though, the Government is also making changes to help us save and pay for our own care more easily. Where will that money come from then? Well, from our pensions apparently. This doesn’t refer to state pensions though. It actually means that private pension providers or insurance brokers will be able to offer options that aid the policy holder to save for the cost of their care later in life. This essentially is your individual choice to make and your money which will ‘supplement’ the cost of care.

This could be useful for anyone who fails to gain Continuing Healthcare funding but how will this money appear in a means tested assessment for financial contributions from the state?

The idea of supplementing your pension is apparently to “add your own protections to what the state can offer”. Care and Support Minister Norman Lamb speaks positively about the idea saying “There’s something quite attractive in just having one pot of money saved for your old age, whether it’s for your financial security or your care needs.”

He says that involving financial services firms has not been possible before now because there was no cap on care fees. Now because care fees are to be capped at £72,000 over a person’s lifetime that person’s contributions to their pension could be assessed for use toward their elderly healthcare.

How this would work

You would make small contributions to your pension pot, then at the point when you require money for residential healthcare the amount paid out from the pot would count toward your lifetime fees cap.

Growing your money in a private pension over a long period of time would mean the impact of your care bills would be lessened. However the idea that you want to reach the care fees cap faster is nonsensical to me. Reaching the cap is completely dependent on paying £72,000 worth of care costs so making large contributions to your lifetime cap is simply an exercise in spending a lot of money- how has that been made to sound positive?

Taking responsibility

I can see though that if our money grows well in these types of pensions this a good way of encouraging people to take responsibility for the cost of their own care. Highlighting the need to plan for the future is important. Very little is yet known about what form these pension or insurance products could take but it’s certainly interesting to see state and private bodies working together to find a solution to finding rising care costs.

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