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01 March, 2015   |   By Ruth Emery - Sunday Times   |   Market News


Pension Freedom - Get ready for April

THOUSANDS of pension savers will be able to unlock their pots in just five weeks, but many still feel confused and concerned about the momentous reforms in the pipeline. 

No hiding from care fees 

The answer to the following question could well help me decide whether to blow my pension pot on a Lamborghini, as suggested by the pensions minister, or keep it invested! I would like to know to what degree my pension is protected. For example, if I go into a care home, will I be able to reduce the income from my pot to zero, thus conserving the capital and avoiding care home fees? Or would I be forced to cash it all in to pay for my care?

David Trenner, technical director at the adviser Intelligent Pensions, replies: “It’s unlikely you could reduce the income to zero and force the local authority to pay your care home fees. The new rules will need some clarification for both divorce cases and the treatment of care costs. However, generally speaking, it is not possible to deliberately deprive yourself of assets in order to pass the care costs means test [currently £23,250 of savings or assets for England and Northern Ireland, £25,250 for Scotland and £23,750 for Wales]. 

“‘Deliberate deprivation’ occurs when an individual transfers an asset or income out of their possession to put them in a better position regarding the means test for care and has done so deliberately. It is almost certain that drawing money out of your pension fund and say, gifting it to your children would be caught, and even drawing the money and buying personal possessions or investments would seem to be covered. If deprivation is proved, you could be assumed to still have that asset or income for the purposes of working out how much you need to contribute towards the cost of care.” 

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