Tax-free ‘Care ISAs’ are being considered by the government as part of a review of the long-term financing of social care.
Chancellor Philip Hammond announced on Wednesday that the government would be publishing a Green Paper on long-term social care financing later this year (see BREAKING NEWS: Chancellor provides £2bn additional social care funding).
The Chancellor said he had ruled out a ‘death tax’ but people could be given tax relief to encourage them to save for their elderly care.
Baroness Altmann, a former Tory Pensions Minister who favours a Care ISA, told The Independent: “Taxpayers simply cannot afford to support increasing numbers of elderly people, but the money must come from somewhere.
“Encouraging everyone to save for later life care, which one in four will need (and one in two of many couples), would signal that care costs must be planned for and incentivising such savings is vital in our ageing population.”
Under the proposals, a Care ISA could be used to top-up individual contributions to social care which could be capped at £72,000 as suggested by the Dilnot review.
Other options being considered are the German model where employers and workers pay into a care fund.
The Japanese system where the over 40s contribute to an elderly care insurance plan and the over 65s have premiums taken from their pensions is also being considered.