How the UK election could impact pensions
By Kirsten Hastings, 31 May 17
What looked like a sure thing when UK prime minister Theresa May called the snap election back in mid-April has turned somewhat muddy. Aegon pensions director Steven Cameron has taken a look at what the parties’ manifestos mean for pensions.
A new approach to social care funding is long overdue. Labour’s manifesto talks of a new National Care Service running alongside the NHS and of coming to a cross-party consensus on how to fund social care.
Suggestions for government-led approaches including a wealth tax, employer contributions, and a social care levy. The Liberal Democrats talk of limiting the amount individuals would pay.
The Conservative manifesto proposal proved so contentious that they made what was widely considered a U-turn within days. Currently, individuals in England (there are different rules in other UK countries) only receive state support if their assets are below £23,250. The proposal was to increase this to £100,000.
The asset test for residential care already includes property but this would have been extended to those receiving care in the home. Another contentious aspect was that individuals could still face an unlimited bill if their assets are well above £100,000, which is not at all uncommon with average house prices sitting at £215,847.
The Tories then announced a post-election consultation which would include the potential for an overall cap on how much an individual would ever pay. A cap is particularly important in encouraging advance planning.
Those facing an unlimited bill, with no state support until assets fell below £100,000, would have no means to plan ahead to cover possible care costs while keeping inheritance aspirations intact. A cap may encourage those who can afford it to ‘do the right thing’.
Cameron said: “[Aegon] believe individuals are more likely to include a ‘reserve’ for care in their pension savings than to set up a separate savings account. But for this to be effective, the current pension lifetime allowance needs to be increased. Either way, a cap could create a major new area of advice for those approaching and in retirement considering social care funding and inheritance.”
