Implications for spouse if pension pot needed for carehome fees

Annief64

My husband has a large pension pot and I have a much smaller one. We have taken the decision to not convert these into an annuity, but to draw them down for shared income instead. If we had converted to an annuity, I would be entitled to spouses pension on his death. My concern is that if he were to need to go into a care home, is there a chance that all of his pension pot could be used to pay for his care home fees leaving me with no entitlement to any of it? I am concerned that I would just be left with my small pension pot to live on or is there some consideration taken that a spouse should have a right to some of it. I am concerned that I may be left very short of money if unable to draw on my husbands pot for shared income as we have planned in this scenario. Does anyone have any advice please. Many thanks.

Keep_pedalling

My understanding of pension pots is that they are treated as income rather than savings. For example if he was not drawing his pension it would be assessed as though he had income equivalent to having purchased an annuity with that pot. 

Where you have a couple who have unequal income then if the major earner went into residential care then the assessment has to take into account of their spouses financial needs so all of it won’t be taken. 

Linton

First point to note is that the council do not take money.  They merely say whether, depending on the financial assessment, they will contribute to care home costs.  How any shortfall  is met is entirely up to the individual concerned and/or their PoA.

According to https://www.ageuk.org.uk/siteassets/documents/factsheets/fs39-paying-for-care-in-a-care-home-if-you-have-a-partner.pdf for the purposes of the assessment if the individual has a partner or spouse the council may only include 50% of a pension value.

MetaPhysical

My thoughts on this is that when you get older, say 75 or 80, buy an annuity with the DC pot in both your names,  Then, if you need to go into a care home, the council could only come for your half of that annuity and not your partners half thereby giving your partner an income.  Of course, even that will effective halve their money if you were spending the annuity as a couple.

I'll stand corrected on whether this is a valid approach or not but it was what I was considering, even though at 58 it is - hopefully - a long way off for me yet.

Albermarle

MetaPhysical said:

My thoughts on this is that when you get older, say 75 or 80, buy an annuity with the DC pot in both your names,  Then, if you need to go into a care home, the council could only come for your half of that annuity and not your partners half thereby giving your partner an income.  Of course, even that will effective halve their money if you were spending the annuity as a couple.

I'll stand corrected on whether this is a valid approach or not but it was what I was considering, even though at 58 it is - hopefully - a long way off for me yet.

Do not forget, that you may wish to spend money on a decent care home, rather than just having to go where the council puts you when/if your money runs out . ( which maybe OK and maybe not) 
This comment applies to all these 'schemes' to avoid paying care home fees.

SVaz

Given your much smaller income, usually only half his pension value is taken into account as you are dependant on him. 
That is unless the rules have very recently changed. 

Purplelady65

I can share the experience of my parents which wasn’t based on a DC pot but was based on investment in shares and funds and a DB pension. My Dad had to go into a care home with a nursing element and was classed as a self funder as he had investments in shares, funds, DB pension and a full state pension (plus extra that he’d paid for due to arrangements at the time). My Mum had a very small DB pension, no investments in shares or funds in her name and a very small state pension. 

As the shares and funds were all in my Dad’s name my Mum had no claim on them not even 50% even though she had a much smaller income. So the instructions from the council were to come back to them when my Dad’s funds were getting near £23k and they would do a full financial assessment. During this period they were then in effect running two properties - so all the running costs and bills of their home that my mum was still living in and then the care home fees plus physio costs, disabled taxi costs e.t.c. so the money was soon eaten into. £250k of investments were sold to pay for the care home fees. The council had done an initial assessment and had indicated that once all the investments had been sold my mum could have 50% of my Dad’s occupational pension which along with her own very small DB pension and very small state pension would have been very difficult to live on. They had suggested she might have to apply for benefits. 50% of my dad’s occupational pension and all of his state pension would be used to pay towards his care home fees once all the money from the investments had gone. 

In the event my Dad died just as they were about to start the financial assessment. My Mum was then eligible for 50% of my Dad’s occupational pension and also a big chunk of his state pension (something to do with the extra he’d paid in?) so financially she could manage then. I think I’ve read the average stay in a care home is around 18 months but my Dad was in one for nearly 4 years and many of the residents were there before him and still there afterwards. It was a really good care home though and they did look after the residents very well. 

Based on my experience I’m making sure that everything is split 50/50 in separate names where possible eg savings accounts, ISA’s, drawdown from SIPPs. It’s not just about one half of a couple going into a decent care home it’s making sure that there is provision for both. If everything is in one person’s name then they will be self funding for years then if the second person requires care there may not be anything left for them if they have a very small income. 

I would urge you to look into the implications of a DC pot when the bulk of it is in one person’s name. It was a very worrying and stressful time re my Dad’s health but with the added stress of worrying about my Mum from a financial perspective as we didn’t know what was going to happen. If my Dad had split the investments so that they each had an equal amount of value in separate names then they would each have had a cushion for care home fees and a lot of worry would have been avoided.