Minister warns elderly must release home equity or buy separate annuities to pay for care

By Daniel Martin

The elderly may have to raid their pension pots and free up equity in their homes to fund their care needs in old age, a minister warned yesterday.
Paul Burstow said those approaching retirement needed to ‘plan and prepare earlier’ how they will raise money to pay for residential care and services such as home helps.
This could mean using tens of thousands of pounds worth of the value of their homes, or taking out special annuity schemes under which part of their pensions savings would be diverted towards any future care costs.
The minister said this would allow the system to ‘access various sources of wealth’ that currently were not being used to pay for care.
Critics said it was disgraceful that pensioners will be left to raid funds they had thriftily saved, despite having paid taxes all their lives. Meanwhile, those who had squandered their money or lived off the State will get free care.

Mr Burstow spoke to the Commons health select committee, on the day cross-party talks began on the future of long-term care in England.
Campaigners are demanding the three parties end the scandal which sees at least 20,000 pensioners sell their homes every year to pay for residential care.
In July, economist Andrew Dilnot called for a cap of about £35,000 on how much people have to contribute to their care. Mr Burstow said a cap, at whatever level, would allow the financial services industry to come forward with new products, including insurance.
Other ideas could be products where pensioners could free up some of the equity in their home. They could also take out ‘disability-linked’ pension schemes under which some of their pot is used to pay for care.
If they end up with no care needs, they would get less money than under a normal pension, but more money would be released if they turn out to have substantial needs.
But Neil Duncan-Jordan, of the National Pensioners’ Convention, warned: ‘There is a limit to the amount we can squeeze out of people’s pension income. If you’re having to use the money not only to keep alive, but also to pay for care, you’ve got serious problems.
‘And if we start using the value of people’s homes to pay for care, we are going to lower the amount of inheritance and make it even harder for sons and daughters to get on the property ladder. We believe the new funding system in the future should be fairer; funded out of general taxation like the NHS.’