Pensions and Care Home Fees

lisyloo

Keep_pedalling wrote: »

And they still do. There were also lots of people studying the humanities back then as well.

My children studied subjects lots of old farts would regard pointless, but it has not stopped them finding good and worthwhile employment.

Back then degrees of any type were of value as demonstrated a capbility that only a minority could demonstrate.
Now 50% have degrees just having one doesn't make you superior (for want of a better word).


Good for your children. I don't know when they graduated but many are not finding a degree the road to riches it once was.

lisyloo

Alibert wrote: »

I meant no difference in principle, or morals
If it's ok to avoid iht it's ok to avoid care home fees

If it's immoral to avoid care home fees it's immoral to avoid iht

Of course practically it might not work

I have no issue morally with tax/benefit planning (but it doesn't necessarily make sense to base your strategy on scenario that doesn't apply to the majority).



I just have personal experience of the type of homes the LA might put you in and if you saw them now you would probably say "over my dead body".
Also do also bear in mind you won't necessarily have the choice to be conveniently close to your family, so you might miss out dreadfully on that score too.

xylophone

If I choose DC over DB to minimise care home fees

Why do you think that having a DC pension would minimise care home fees?

Malthusian

xylophone wrote: »

Why do you think that having a DC pension would minimise care home fees?

First of all, strictly speaking we should say "minimise the amount one has to contribute to care home fees" as the fees depend on the care home.

If you take benefits from a DB pension then no matter what, your income from your scheme pension will be assessed and will be paid towards care home fees.

If you have a DC pension and leave it there or draw a sustainable income, then once you are past State Pension Age that will be assessed, so having a DC pension doesn't minimise jack. However, with a DC pension you have the option of, say, splurging the whole lot on a round the world cruise - and yes, there are deliberate deprivation rules, but if you splurge the entire pension pot in the year or so after you leave work, live off the State Pension and then require a care home ten to twenty years later, the council isn't going to leave you to wander the streets or take up an NHS bed forever just because you used to have money ten to twenty years ago.

Nobody reading this is likely to splurge their entire pension fund for any reason, including avoiding care fees. However the OP can be forgiven for considering the fact that a DC pension gives you more flexibility and in theory, that flexibility could be used to spend the fund before the point it becomes assessed for care fees, whereas with a DB pension you can't spend the whole fund.

However all of the above is based on the common fallacy that care home fees are a tax that doesn't benefit you. They are not; as has been thoroughly covered above, they keep you out of Overmydeadbody Grove.

Alibert

The practical advice on the thread is very useful, and I appreciate that nothing is simple

I was making the general point that arranging your affairs with an eye to maximising the government contribution your care home costs or no more or less immoral than arranging your affairs with an eye to maximising any other benefits you receive, and with an eye to minimising your various tax bills

Governments have created a complex system where different behaviours generate different impacts on tax and benefits . They WANT us to change our behaviour and make different choices in response to the incentives and penalties they create.

lisyloo

Totally agree.
I think it's crazy that someone well-off can reduce their salary (via salary sacrifice) to get in-work benefits.
I have NO issue at all though with people following the rules.
I follow the rules to best advantage myself.
It's often the well-off that can afford the salary sacrifice/solar panels or whatever it is to take advantage.

xylophone

Having squandered the DC pension would not prevent other assets being taken into account.

Alibert

If you have a dB pension of 20k that will be £20k income to spend on care home fees

If instead you had a transferred out and received a pot of, say, £600k , then
1 if you are less than spa then they assess you as having no income , so no contribution to care home fees
2 if you are above spa the assumed annuity value of that pot might be less .. say £15k .. so less care home fees to pay.

Or perhaps not depending on lots of things.
It's just one thing to take into account I think.

Care home fees are probably the most likely financial catastrophe an old person can possible suffer (others you can think of, like house burning down , you can insure against) .
It may not happen but if it does you lose everything . It is silly not to consider it in your plans , and work out how to minimise

lisyloo

if you are less than spa

Unlikely. Younger people do sometimes go into homes, but it's mostly people in their 80's and 90's not very often people in their 60's.

2 if you are above spa the assumed annuity value of that pot might be less .. say £15k .. so less care home fees to pay.

Not if you own a home and it's not disregarded, which is a likely scenario.

It's just one thing to take into account I think.

One yes. Probably 4 times as many people (80%) have children they want to consider as go in care homes (20%).
Not saying you shouldn't consider it, just putting it into perspective.

It may not happen but if it does you lose everything

It's a minority scenario.
Unlikely you'd lose everything if you have a homeor even if you do.

So even if you lost the income it might mean you didn't have to sell your home and could leave that for your beneficiaries.
If you lived 2 years (many people don't live long), then let's say you'd paid £45K (actual figures), then that's not much as a proportion of £600K.


If you can minimise without any downsides then of course it makes sense, otherwise you have to weigh up the likelihood of this minority scenario.
Your scenario shows less fees to pay because you've lowered your income by £5K per annum. I'm not sure how that makes sense. You pay less care fees because you've got a worse deal and 80% of people won't go into a care home at all.


So I agree it makes sense to take it into account, but it doesn't make sense to do something that's overall going to be worse for a 20% likely scenario (and less likely in individual cases).



We are getting better at looking after people in their own homes (which is cheaper) and robots will help in the future.

Alibert

Some parts of government policy encourage people into care homes .. Viz
..care home fees can be deferred and taken as a charge on your house, so only paid when you die
..but cost of care inside your own home can't be deferred.

So the only way you can afford care in your own home is to , um, sell your home