A tax-free pension scheme to fund elderly care costs is being considered by the Government.
The proposals by former pensions minister Sir Steve Webb, who now works with the Royal London insurance company, were revealed today by The Times.
Sir Steve said: “This product structure suggests that it would be relatively straightforward to integrate a care insurance element.
“There are various ways in which this could work, but a simple model would be that the policyholder commits to pay a regular insurance premium directly from the drawdown account to the product provider.”
The scheme, which would require the Government to remove a cap on care bills, will allow people access to their pension when approaching retirement without paying income tax in order pay premiums on a long-term care insurance.
Sir Steve said the scheme would requires personal monthly contributions of around £100-150.
Under the scheme, the insurer would commit to pay an agreed sum to cover care costs above a certain threshold, which could be used for domiciliary or residential care.