Private pension pot and paying for care

Briskly

A  relative has just been refused continuity of care, but needs to be looked after in a nursing home because he is immobile and has terminal cancer. If is going to cost around £1800 a week and because he has savings and owns a property he has to pay privately. His savings will last around 13 weeks until they go below the £23,500 mark. He has a modest private pension pot which he never draws on for income. I think it would be a good idea if he applies to the LA or a charge to be put on his house at this point, or sooner, as if he cashes in his pension, as i see he will be taxed on it, possibly at up to 40%. I realise the LA charges interest, but this is better than paying the taxman. I have been told by a social worker that he will have to draw down the pension before the LA will consider putting a charge on the house. Anyone know if this is correct? Any suggestions? Grateful for any help.

Marcon

Briskly said:

A  relative has just been refused continuity of care, but needs to be looked after in a nursing home because he is immobile and has terminal cancer. If is going to cost around £1800 a week and because he has savings and owns a property he has to pay privately. His savings will last around 13 weeks until they go below the £23,500 mark. He has a modest private pension pot which he never draws on for income. I think it would be a good idea if he applies to the LA or a charge to be put on his house at this point, or sooner, as if he cashes in his pension, as i see he will be taxed on it, possibly at up to 40%. I realise the LA charges interest, but this is better than paying the taxman. I have been told by a social worker that he will have to draw down the pension before the LA will consider putting a charge on the house. Anyone know if this is correct? Any suggestions? Grateful for any help.

Bit of a sensitive question to ask him, but I wonder if he's been given any indication of life expectancy? Do you know? 

If it's less than 12 months, and he hasn't taken anything from his private pension pot, the whole lot might be able to be 'commuted on grounds of serious ill health', with no tax charge. If he has already taken the full 25% tax free lump sum from his private pension pot, then what's still in the pot now will be fully taxable. If he's taken some tax free cash but not the full 25%, then it's still an option worth exploring with the provider, to establish how much might be taken without a tax charge IF he (sadly) qualities for serious ill health commutation.

Whether that's best for him in these circumstances I don't know - not enough information, but you seem to have discounted it on his behalf because of the possibility of 40% tax. Maybe the information above might make it worth rethinking, assuming he qualifies for a Deferred Payment Agreement? Page 14 of https://www.ageuk.org.uk/siteassets/documents/factsheets/fs38_property_and_paying_for_residential_care_fcs.pdf should answer your question and give you other helpful information.

elsien

If you mean continuing healthcare, If he feels there’s been a mistake, he needs to appeal.

But nursing needs don’t cover what is sometimes thought to be obvious, So lack of mobility isn’t going to fall into that category, and it’s the impact his cancer is having on him at the moment that will be relevant in terms of nursing care, rather than the diagnosis itself. 

Most people get the nursing top up paid to the nursing home rather than full health funding.

I’m presuming that he’s not on the fast track because although ill he’s not deteriorating rapidly? Is he claiming attendance allowance because he’s entitled to that as a self funded. Also, if he’s not done a power-of-attorney yet he really should do so. 

I can’t answer your question about the pension however I would say that social workers as a rule tend not to get involved in the financial assessments because that’s a different bit of the local authority that carries that out after other care assessments have been completed so the information that you’ve been given may not be accurate. 

elsien

Also to add, councils will have some discretion outside of the statutory criteria for deferred payments so there is an element of flexibility.
This will vary between councils, but this one gives you an idea of some of the things they will consider. There may be similar on your local authority website.

https://api.warwickshire.gov.uk/documents/WCCC-1200341575-4429

tacpot12

I don't think it is correct that he has to drawdown on the pension before they can consider placing a charge on the house. They can and will assume an amount of 'notional income' that he could receive from his pension, and will factor this into the financial assessment, but I don't think he can be forced into drawing down - however, the assumption on the notional income means that he will be worse off if he doesn't draw down at least the amount of the notional income from his pension - by worse off, I mean that they will lend him less money to pay for his care. There will be a shortfall that will need to be made up.

Moonwolf

If the only reason not to take the pension is concerns about tax, and there are medical conditions, is there mileage in looking into an annuity.  With serious health issues the monthly income might be relatively high and slow down the drain on other resources.

I'd be interested in what the experts on here think of this, is it too late in the day to be practical or are there mechanisms to buy a proportion of care fees guaranteed from pension pots. (If not I think there should be) 

LHW99

Moonwolf said:

If the only reason not to take the pension is concerns about tax, and there are medical conditions, is there mileage in looking into an annuity.  With serious health issues the monthly income might be relatively high and slow down the drain on other resources.

I'd be interested in what the experts on here think of this, is it too late in the day to be practical or are there mechanisms to buy a proportion of care fees guaranteed from pension pots. (If not I think there should be) 

You need to look for an "Immediate Care Needs" annuity. This may help you search, as only a few companies offer them, and then only via an adviser.

https://societyoflaterlifeadvisers.co.uk/

Moonwolf

LHW99 said:

Moonwolf said:

If the only reason not to take the pension is concerns about tax, and there are medical conditions, is there mileage in looking into an annuity.  With serious health issues the monthly income might be relatively high and slow down the drain on other resources.

I'd be interested in what the experts on here think of this, is it too late in the day to be practical or are there mechanisms to buy a proportion of care fees guaranteed from pension pots. (If not I think there should be) 

You need to look for an "Immediate Care Needs" annuity. This may help you search, as only a few companies offer them, and then only via an adviser.

https://societyoflaterlifeadvisers.co.uk/

Thanks, that is what I was thinking of. 

Might be good for the OP and apparently not taxed as well but it does go straight to the care home..

https://www.moneyhelper.org.uk/en/family-and-care/long-term-care/immediate-needs-annuity

Briskly

Marcon said:

Briskly said:

A  relative has just been refused continuity of care, but needs to be looked after in a nursing home because he is immobile and has terminal cancer. If is going to cost around £1800 a week and because he has savings and owns a property he has to pay privately. His savings will last around 13 weeks until they go below the £23,500 mark. He has a modest private pension pot which he never draws on for income. I think it would be a good idea if he applies to the LA or a charge to be put on his house at this point, or sooner, as if he cashes in his pension, as i see he will be taxed on it, possibly at up to 40%. I realise the LA charges interest, but this is better than paying the taxman. I have been told by a social worker that he will have to draw down the pension before the LA will consider putting a charge on the house. Anyone know if this is correct? Any suggestions? Grateful for any help.

Bit of a sensitive question to ask him, but I wonder if he's been given any indication of life expectancy? Do you know? 

If it's less than 12 months, and he hasn't taken anything from his private pension pot, the whole lot might be able to be 'commuted on grounds of serious ill health', with no tax charge. If he has already taken the full 25% tax free lump sum from his private pension pot, then what's still in the pot now will be fully taxable. If he's taken some tax free cash but not the full 25%, then it's still an option worth exploring with the provider, to establish how much might be taken without a tax charge IF he (sadly) qualities for serious ill health commutation.

Whether that's best for him in these circumstances I don't know - not enough information, but you seem to have discounted it on his behalf because of the possibility of 40% tax. Maybe the information above might make it worth rethinking, assuming he qualifies for a Deferred Payment Agreement? Page 14 of https://www.ageuk.org.uk/siteassets/documents/factsheets/fs38_property_and_paying_for_residential_care_fcs.pdf should answer your question and give you other helpful information.

Thanks. We haven't been given any indication of life expectancy, although from its nature I would imagine it will be  less than 12 months.  He has used about 2% of the tax free lump sum. I'll see if we can contact his pension administrator about the ill health commutation. But this mean that over 12 months he loses it?

Briskly

elsien said:

If you mean continuing healthcare, If he feels there’s been a mistake, he needs to appeal.

But nursing needs don’t cover what is sometimes thought to be obvious, So lack of mobility isn’t going to fall into that category, and it’s the impact his cancer is having on him at the moment that will be relevant in terms of nursing care, rather than the diagnosis itself. 

Most people get the nursing top up paid to the nursing home rather than full health funding.

I’m presuming that he’s not on the fast track because although ill he’s not deteriorating rapidly? Is he claiming attendance allowance because he’s entitled to that as a self funded. Also, if he’s not done a power-of-attorney yet he really should do so. 

I can’t answer your question about the pension however I would say that social workers as a rule tend not to get involved in the financial assessments because that’s a different bit of the local authority that carries that out after other care assessments have been completed so the information that you’ve been given may not be accurate. 

Thanks. I I suppose it must be that he isn't being fast tracked because he isn't deteriorating rapidly. Thanks for pointing that out. I must get the POA sorted - it took about 5 months when I did it for my  Mum. And the AA. 

Briskly

Moonwolf said:

LHW99 said:

Moonwolf said:

If the only reason not to take the pension is concerns about tax, and there are medical conditions, is there mileage in looking into an annuity.  With serious health issues the monthly income might be relatively high and slow down the drain on other resources.

I'd be interested in what the experts on here think of this, is it too late in the day to be practical or are there mechanisms to buy a proportion of care fees guaranteed from pension pots. (If not I think there should be) 

You need to look for an "Immediate Care Needs" annuity. This may help you search, as only a few companies offer them, and then only via an adviser.

https://societyoflaterlifeadvisers.co.uk/

Thanks, that is what I was thinking of. 

Might be good for the OP and apparently not taxed as well but it does go straight to the care home..

https://www.moneyhelper.org.uk/en/family-and-care/long-term-care/immediate-needs-annuity

Thanks for these comments. If he were use the pension pot to buy a care needs annuity would he be taxed on the drawdown?