Private pension pot and paying for care

Marcon

Briskly said:

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?

If his life expectancy is more than 12 months, then he wouldn't get the tax concessions which would be available to someone with a defined contribution pension scheme whose life expectancy was less than 12 months AND who hadn't taken their full 25% tax free element from the pension pot.

Moonwolf

Briskly said:

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?

I'm hoping someone else can answer this.  

A normal annuity is not taxed at the point you use your pension to buy it but on the income you receive.

It seems clear that income from an immediate needs annuity that is paid directly to the care home is not taxable and it appears you can buy directly from your pension.

Thus my interpretation is that there is no tax to pay but you might need an IFA to sort it out and I am relying on what I have read today.

Briskly

Thankyou very much for this

Sarahspangles

elsien said:

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. 

This is a good point. We naturally think that when someone needs a high level of support after something like a stroke this is ‘nursing’, but the key factor is whether it is something that can only be done by a registered nurse. When patients are ‘medically optimised for discharge’ from hospital the target may be for them to be in a position where their needs can be met by carers. This can still be really technical or skilled care like administering total parenteral nutrition.