Government considers tax-free care pension plan

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.

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“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.

 

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One Comment;

  1. keith Ralph said:

    They say this is simple!! No it will not be simple, once you see comments such as to “pay premiums on long term care insurance” and “to cover care costs above a certain threshold” you know there is going to be all manner of terms and conditions and qualifying clauses by the insurers to minimise their financial exposure. It beggars belief that educated people in parliament keep coming up with these spurious over engineered initiatives when a genuine simple solution is staring them in the face. Introduce a Care National Insurance contribution that is ring fenced for that purpose, making care free at the point of access. Yes higher earners will pay more than others and some will use the service more than others but that principle already applies to health services, so I fail to see any negative aspects to this approach unless we accept the current system is unfair. The only impediment I can see, is the Political will to do it because it will be seen as a direct tax hike which never sits well with the electorate. I do not know anyone who I talk to in my social or professionals circles that objects to this proposal – none! So lets please have an open and sensible debate or put it out for public consultation because we must find a permanent fix to this ever growing problem of funding care for our ageing population.

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