Another Access to Pension Issue


T

thescullster

Hi all

A lot of discussion has surrounded this "access to pension funds at age
55" business. I think it is generally agreed that flexibility (for
those savvy enough) is a good thing.

My concern with this is the possibility that making funds accessible to
the individual also makes them accessible to the government.
In other words, if you need money in future for e. g. nursing care I can
well see your entire pension pot being considered as disposable income
to cover this.

Has this been covered elsewhere or reassurances given?

Thanks

Phil
 
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T

tim.....

thescullster said:
Hi all

A lot of discussion has surrounded this "access to pension funds at age
55" business. I think it is generally agreed that flexibility (for those
savvy enough) is a good thing.

My concern with this is the possibility that making funds accessible to
the individual also makes them accessible to the government.
In other words, if you need money in future for e. g. nursing care I can
well see your entire pension pot being considered as disposable income to
cover this.

Has this been covered elsewhere or reassurances given?
I don't see why this is an issue at 55.

Few people are forcibly put into a "home" at this point in their life, the
vast majority of people who are placed into a at home at "council expense"
are well beyond the point of having cashed in their pension and will either
have spent it or turned it into an irreversible annuity.

You can't claim council help for voluntarily going into a home

tim
 
T

thescullster

I don't see why this is an issue at 55.

Few people are forcibly put into a "home" at this point in their life,
the vast majority of people who are placed into a at home at "council
expense" are well beyond the point of having cashed in their pension and
will either have spent it or turned it into an irreversible annuity.

You can't claim council help for voluntarily going into a home

tim
Hi Tim

The issue is that buying an annuity is no longer recommended (due to
very low returns caused by interest rate levels).
So pension savings will be more accessible in "income drawdown" plans
and similar, regardless of age.

Nursing care was in the news recently(ish) as people with "savings" were
expected to use these to fund elements of this care down to certain
savings level.

My concern is that pension pots become targets for means testing as the
government changes make them more accessible.

Phil
 
R

RobertL

Hi Tim

The issue is that buying an annuity is no longer recommended (due to
very low returns caused by interest rate levels).
So pension savings will be more accessible in "income drawdown" plans
and similar, regardless of age.

Nursing care was in the news recently(ish) as people with "savings" were
expected to use these to fund elements of this care down to certain
savings level.

My concern is that pension pots become targets for means testing as the
government changes make them more accessible.

I think this is an important question. A related situation exists already with SIPPs and income drawdown, although the maximum rate of drawdown is limited. How is that handled? Are people forced to draw down at the maximumrate if they are in council-funded care?
 
T

thescullster

I think this is an important question. A related situation exists already with SIPPs and income drawdown, although the maximum rate of drawdown is limited. How is that handled? Are people forced to draw down at the maximum rate if they are in council-funded care?
Exactly the sort of thing I was driving at, but there don't seem to be
any takers!
 
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T

thescullster

IIRC the current regulations dealing with care already count as income
any pension which a claimant is entitled to claim but has not done so
and any capital which the claimant is entitled to receive and can
receive in the UK. It's all in CRAG - the assessment "bible" - you can
download

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/301250/CRAG_34_April_2014.pdf
AIUI, under the new rules you would be "entitled" to withdraw your
entire pension pot (albeit paying more tax).

Phil
 
R

Robin

AIUI, under the new rules you would be "entitled" to withdraw your
entire pension pot (albeit paying more tax).
Instead of (in most cases) buying an annuity which would count as income
for a charging asessment.

If your point is that some people in edge cases might not be able to
keep their cake while others pay for their bread and butter then I don't
really know - or care.
 
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D

David Woolley

The point is that some people may choose to make extra provision
for their retirement years, rather than fritter money on consumer
goods during working years.
Are you proposing that these people should be penalised for their
spending choices?
In the circumstances were care home costs come into consideration, the
remaining life expectancy is likely to be about 27 months and luxury
spending is unlikely to be of much benefit. Even if the unused pension
fund could not be extracted as capital, the government would expect it
to be turned into an impaired life annuity of at least the lower of what
the capital would support, or the amount needed to cover fees and living
costs.

The only real differences here are when there is an expectation of some
money being left over for the estate, and as to whether the local
authority or the insurance company takes the actuarial risk.

If the capital is protected, or one chooses the annuity route, the risk
is that your estate gets less if you die earlier than expected and the
insurance company bears the cost if you die later.

If fees are paid from capital in the pension fund, your estate gains if
you die before the capital runs out, and first your estate, and then the
local authority, lose if you die later.

I haven't considered the cap that was proposed, and my have been
implemented, on at least part of the care home cost, which means that
the local authority will bear part of the cost of those who live longer
than expected.

Those most likely to have a long care home stay are probably those with
dementia and living alone. They are not going to be capable of spending
on luxuries.

The aspect of pension funds that might be relevant from a deprivation of
capital point of view is the ability to defer taking an annuity on part
of the fund and the balance of the fund being part of the estate but
that is not particularly new.
 

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