Legal & General is lobbying for a change in regulations to allow people to unlock their annuity to pay for long-term care.
Currently, people can choose annuity value protection, an optional benefit that pays out a lump sum of their original pension pot on death before age 75.
The payment can be all or part of the original pot minus inc-ome payments until death and 35 per cent tax.
The Association of Brit- ish Insurers is calling for more flexibility over the payment of the annuity value protection lump sum.
But L&G wants the rules to be changed to allow annuitants who require long-term care to unlock these funds early.
The firm says if the annuitant is unable to perform certain activities of daily living, the lump sum should be payable at this point to help pay for care instead of on their death.
Head of annuities Tim Gosden says: “People often end up having to sell their home to pay for LTC because there is no other cash available. But their annuity could be a source of a lump sum if the rules were changed. Currently, under this option, the lump sum is only paid out on death before age 75 but we are saying pay it our earlier if the annuitant requires care.
“So, instead of providing what, for many, is a minor regular income, what if some or all of the annuity fund could be released as a lump sum to pay for care as it might save the individual from having sell their home.
“Care is often only required for a short time as life expect-ancy is not that long in a nursing home. It would not be right for everyone but for many it could be a real godsend.”