The Prime Minister has warned people who cash in their pension pot could be punished when they need to pay for old age care, reports the Daily Telegraph.
People who choose to take large sums from their pension pots under the Government’s reforms – announced in the Budget last week – may end up paying more for their care, David Cameron has admitted.
From 2016, people with assets of more than £118,000, including their own homes, will have to pay for their social care in old age.
The Telegraph reports: The Prime Minister said that those who choose to take large sums from their pension pots under the Government’s reforms could be pushed over the limit. However, he said that people “have a choice” about whether they take out an annuity or decide to withdraw their money and invest it elsewhere.
Mr Cameron said: “The point about care homes is important. I know there is a concern that if you take your money out of your pension pot and have it as your own money, it counts as your money when you are assessed for care needs. That is true, that is the case, but you have the choice.”
The Government will introduce a limit of £72,000 on the amount any one person has to pay for social care from April 2016, although this does not include the cost of food and accommodation in a home.
The Telegraph went on: Mr Cameron attempted to capitalise on the reception for the Coalition’s radical pensions shake-up, which includes moves to scrap rules that force most pensioners to use their direct contribution funds to buy an annuity, even though the rates can be poor. Although most of the reforms will apply from April next year, a number will be brought in from Thursday to ensure people close to retirement do not miss out.
Individuals with pension savings of £30,000 or less will be able to take the full amount as a lump sum, nearly double the current £18,000 limit.