Pensions White Paper

October 2013

According to Government projections, over 80% of us will require care and support after age 65. The number of people living in the UK and aged over 85 is projected to double over the next 20 years, with many of this demographic finding a shortfall in retirement savings. Alarmingly, half of this group may also have to find additional finances for care costs of up to £20,000. This is a crisis in the making: a scenario exacerbated by a complex savings regime, the lack of pensions integration with other benefits, and widespread confusion about what the State will provide.

The Government has issued a challenge to the pensions and insurance industries to come up with new ways of funding long term social care. Responding to this request, Squire Sanders’ white paper argues that pension plans could play a key part in addressing this important social problem.

Using data gathered from a pensions industry survey in association with Pensions Insight, we consider attitudes towards the integration of pensions and social care and
discuss how pensions may be a viable source of funding as part of a wider solution to the current crisis in the funding of long-term care. We also assess the changes needed to legislation and benefit design to ensure greater flexibility to meet social care costs.

Some of our key recommendations from the paper, amongst others, include allowing:

  • Savers to earmark part of their pension rights in advance of retirement to provide for care.
  • Earmarked pension savings to be charged in favour of a suitably approved care provider.
  • Pension savers to split and defer their tax free lump sum entitlements within the same plan to provide for care.
  • Increased flexibility in existing tax reliefs so that unused reliefs and allowances could be portable between savings vehicles and couples.

Our white paper is a starting point for a more focused debate. For questions or to provide us with any feedback and opinions on any of the issues raised in this publication, please contact us.