Care Fees Annuity with Pension

Paul_Varjak

Is it possible for someone who has not yet purchased a pension annuity with their pension 'pot' to buy a 'care fees annuity' with that money if, at the time they purchase an annuity, they require residential/nursing care?

One adavantage of a care fees annuity is that no tax is payable when the annuity is paid direct to the care home.

Debt_Free_Chick

As far as I am aware, no. If the pension pot originates from an approved personal pension plan (including an occupational DC scheme), then you can only buy a Compulsory Purchase Annuity, payable to the pension plan holder, subject to income tax and paid for life.

A Care Fees Annuity can only be secured by the individual's own capital, which would exclude that from an approved pension plan - except any part taken as tax free cash. So, one could use the tax free lump sum from an approved personal pension plan to buy a Care Fess Annuity, but the remainder must be used to buy a Compulsory Purchase Annuity.

HTH

EdInvestor

Just a comment, but why is it that we have these kind of restrictions on using our retirement savings?

Constantly there are difficulties about investing people's penson pot because of the way "the system" works.

Time to get it sorted IMHO. :mad:

Paul_Varjak

This goverment does not wish to fund 'personal care' but, seemingly, puts barriers in the way of people wishing to fund their own care.

Shouldn't people should have access to their pension 'pot' if they require permanent care and/or they are terminally ill, regardless of their age?

Debt_Free_Chick

Without wishing to sound as if I'm defending the Government here .... the LTC issue is relatively new, compared with our mature pensions system. And the Care Fees Annuity is largely a product invented by the annuity providers.

Some "joined up policy" from the Government would be an advantage, but this is simply an example of something new being introduced alongside something that already exists.

One can, of course, use the annuity from a pension to fund LTC fees - but without the apparent tax advantage that the Care Fees annuity has. However, all purchased life annuities are subject to different tax treatment. They are classed as part income, part return of capital. An annuity from a personal pension is classed as 100% income.

Perhaps the answer lies in the tax system. If the taxman were to agree that a personal pension annuity could be paid directly to fund LTC, in the same way as the Care Fees annuity, with the same tax treatment, then the anomaly would disappear.

Just an obversation

EdInvestor

Perhaps the answer lies in the tax system. If the taxman were to agree that a personal pension annuity could be paid directly to fund LTC, in the same way as the Care Fees annuity, with the same tax treatment, then the anomaly would disappear.

Good idea: for some people this might also help avoid the dreaded sale of the house that upsets and annoys so many families.