If you are under 60, funding your future care might not be top of your agenda. Garden improvements, good restaurants and holidays probably rank slightly higher, as well as saving for your pension if you have not yet retired.
However, the government could be proposing a new ISA in order to encourage people to start saving for their later life care. Recent leaked government documents suggest that the government is considering a Care ISA as part of its forthcoming green paper on social care.
The Care ISA would have a tax free allowance of its own that reflects the cost of care. Any leftover savings from this ring-fenced amount would be safe from inheritance tax on death.
The high cost of later life care is something that looms for many of us. Currently, those in England and Northern Ireland who have assets of more than £23,250 will be expected to self-fund their care completely. This can mean selling the family home and spending a chunk of your savings on funding care.
Councils are becoming increasingly ruthless in cracking down on people who deliberately deprive themselves of assets by giving them away. There is no time limit on how far a council can go back when claiming deliberate deprivation. A Care ISA would mean that, if a saver comes to need later life care, more of their assets would be protected. However, the Care ISA has been widely criticised by both providers and financial commentators.
For many people, an inheritance tax break is not relevant, which could limit the Care ISA’s uptake, making it unattractive for providers to offer it. This means that providers are unlikely to see the Care ISA as a significant business opportunity. The upfront costs of implementing the niche ISA could make it unprofitable.
What is more, it is unclear how the government would clamp down on the tax loophole that will emerge if savers pay for their care from funds outside of the Care ISA. The abundance of negative feedback means that the Care ISA may well remain the stuff of fantasy for the treasury.
26 September 2018
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