June CPD Newsbrief — Protection
IFoA urges pensions ring fence to fund care
The Institute and Faculty of Actuaries (IFoA) wants the government to introduce a pension-style savings vehicle to encourage people to save to cover the cost of long-term care.
In a new report, the IFoA suggests a new “pension care fund”, a savings pot that would run alongside defined-contribution pension schemes. Pension contributions would still be tax free, and any monies not spent on care can be passed on free of inheritance tax to fund the care of a spouse or beneficiary.
The Care Bill proposes capping local authority care costs for those over state retirement age at £72,000. The cap is due in April 2016, but will not cover daily living costs or accommodation costs, which are more than local authorities would usually pay, known as top-up fees.
IFoA’s report estimates one in 12 men and one in six women aged 85 today will reach the cap. It says on average people can expect to have spent around £140,000 before they reach the cap, and that if they are in care for 10 years the cost could rise to £250,000.
It is hoped the cap will make it easier for insurers to design long-term care products. But in February care minister Norman Lamb said insurers had told government there needs to be regulatory changes before they would look to launch new products.
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