Speaking to International Adviser, Mark Hassall, director of UK-based IFA firm Moneyology, said: “The government needs to make its mind up if it really wants people to be less reliant on the state in which case give incentives back for pensions. The current life time allowance of £1m ($1.28m, €1.15m) would not pay for a pensioner’s long term care after tax per year.
“We need stability not wobble and turn at every opportunity. The government have had countless reports on long term care over the years they now need to grapple with the complexity and stop robbing Peter to pay Paul,” he told IA.
His comments refer to British prime minister Theresa May’s Conservative manifesto pledge to include taxpayers’ homes for the first time when calculating the cost of elderly social care.
Currently, anyone with assets of over £23,250 is expected to pay the full cost of their care, which doesn’t include the value of their homes.
Under the new ‘floor’, people with more than £100,000 in assets will have to pay for their own elderly care out of the value of their homes, rather than relying on the council to cover the costs of visits by care workers.
Taxpayers can defer payment as the state will deduct the cost from their estate when they die, which critics have dubbed a ‘dementia tax’ because sufferers of the disease living at home will have to pay while people with cancer in hospital would not.
Despite health secretary Jeremy Hunt being adamant the Conservatives would not be setting a cap on such care costs, May issued a U-turn saying she will set an “absolute limit” on the money people will have to contribute.
Scott Gallacher, a chartered financial planner at UK-based IFA firm Rowley Turton, said social care is “clearly a major financial issue”, and one that successive governments have “simply kicked into down the road”
“It’s really a Catch 22 for the politicians. People are not prepared to pay additional tax to pay for other people’s parent’s care but nor are they prepared to lose their inheritance (their parents’ home) to pay for their parent’s care,” he told IA.
Gallacher said that advisers are also concerned about whether the government will push ahead with key tax changes announced in the Spring Budget. These were subsequently dropped from the Finance Bill shortly after May called a snap election.
These include proposed cuts to the tax free dividend allowance, which was set to be slashed from £5,000 to £2,000 by April 2018 as well as the money purchase annual allowance (MPAA), which should have gone from £10,000 to £4,000 on 6 April.
“Uncertainty is clearly unwelcome with financial planning, consequently, an early general election is less than ideal.
continued on the next page