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'Pension Freedoms', Social Care and Inheritance


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Unlike healthcare, generally provided free at the point of delivery in England, social care for elderly and disabled people who need help with everyday tasks is the subject of a significant means test. Local authorities responsible for a person’s care will undertake a detailed financial assessment of a person’s capital and income in order to determine her liability to pay for her own care, using an extremely complex set of regulations made under the Care Act 2014. The system is very controversial because it can prejudice family members’ ability to inherit a care recipient’s property, including the family home. This is true notwithstanding the controversy that exists in contemporary social conditions about the extent to which family members, and particularly adult children of the deceased, might reasonably expect an inheritance.

Pension income from a traditional annuity is generally treated as relevant income for the purposes of a local authority’s social care financial assessment. ‘Pension freedoms’, however, whereby people were given greater freedom to withdraw money from their pension pots and decide how for themselves how to fund later life under the Taxation of Pensions Act 2014, complicate this position. Exercising such freedoms could cause property derived from a pension scheme to be treated as capital instead (for example), and gifting such capital could even trigger anti-avoidance action by a local authority. The aim of this chapter is to explore the potential implications of ‘pension freedoms’ for liability to fund social care, including the knock-on effect on survivors’ inheritance rights and expectations. It begins by outlining the social care system and its funding, including the general financial assessment process undertaken by local authorities. In Part III, it then considers the particular treatment of pensions within that system, both in the context of traditional annuities and ‘pension freedoms’. It will evaluate the particular risks and potentially unexpected consequences of exercising ‘pension freedoms’ for the increasing numbers of people likely to require social care. The chapter will argue that while social care is unlikely to be the primary consideration for a person contemplating the exercise of ‘pension freedoms’, proper advice is still essential in order to avoid unexpected complications to funding assessments, prejudice to inheritance rights and even litigation between local authorities and the family members of social care recipients.



'Pension Freedoms', Social Care and Inheritance


Is Part Of

Pensions: Law, Policy and Practice

Book type


Hart Publishing

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