Social care cap plans to hit pensioners as Britons will need to work 'closer to 70!'

3 mins read

“It’s possible to increase your own pension contributions up to the level of your annual earnings or £40,000, whichever is lower, even if your employer will only pay in up to a certain amount. It’s also important to remember that income taken from a pension is taxable at your marginal rate, whereas money taken out of ISAs is free of income tax.”

Becky O’Connor, Head of Pensions and Savings, interactive investor, warned of the difficulty in planning to cover care costs, due to the uncertainty about whether it will be needed or not.

She added: “The findings from the Great British Retirement Survey show that concerns about the cost of care play on people’s minds. There are limited ways to pay for it.

“Many people would understandably prefer to pay for it out of unused ISA and pensions balances rather than selling their home or taking an equity release loan. However this requires contributing even more when you are fit, well and working, so that you can have enough both for retirement income and potential care costs.

“If you do need to pay for care, this can of course significantly eat into what you can leave from your pension or other investments to relatives. The survey shows that this is also a concern, but less so, perhaps because of an understanding that there is very little anyone can do about how much care they are going to need in order to protect an inheritance for loved ones.

“This is something to bear in mind also for younger generations who might be expecting to receive an inheritance. They need to be mindful that this can’t be taken for granted because of the potential bill for care.”

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