“If someone as well as their home has substantial other assets, money in the bank, shares or whatever, should they be expected to use those assets to pay for care? Or should we say, we will always defer the costs of selling their home? If you’ve got a vast amount of money in the bank, you’re quite wealthy, it’s desirable that we protect that money but the scheme has to be affordable. If together with owning your own home, you have more than £23,000-odd in the bank, the question is should you be expected to use that money. You are not forced to sell your home.”
You might think this statement, reported in the Telegraph, pretty uncontroversial. After all, the average value of a house in the UK is £247,000. If you add savings of at least £23,000 to that, together with the annual income from a standard state pension (up to £11.5k for a married couple) and any additional state pension or private pension income, then I think it’s fair to say people in such a category are “quite wealthy” by any objective, or indeed relative, measure.
Not, though, if you’re Labour peer Lord Lipsey, who worries that those with assets of a penny less than £270,000 “won’t be able to have the things that make life worth living: presents for your grandchildren, books and newspapers.”
And not, it seems, Telegraph readers who reckon being ‘quite wealthy’ only kicks in when you’ve got at least £100,000 savings in the bank:
It’s all relative, I guess. But can it be right that someone currently working full-time on the minimum wage should be taxed in order to ensure that someone else worth hundreds of thousands of pounds doesn’t have to pay towards their care costs. That doesn’t sound much like social justice to me.
* Stephen was Editor (and Co-Editor) of Liberal Democrat Voice from 2007 to 2015, and writes at The Collected Stephen Tall.
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45 Comments
The home shouldn’t be exempt at all, but we should have an asset threshold. Otherwise it won’t be fair.
What I mean is, we can’t have a situation where people who have multi-million pound homes can receive state help but those with £24,000 and nothing else can’t. I would support Norman Lamb’s statement, but I’m weary about this home exemption that sounds like a tory plan to protect people with large estates.
I was amazed when this argument came up, then fearful that it would be the LibDem spokesman put up to explain, and fearful again when Norman Lamb did his duty and didn’t address the issue head-on. Lansley screwed this issue up in 2010 and Labour might now return the compliment.
The idea that older people needing expensive care shouldn’t have to face the loss of the family home is benevolent, and a scheme to postpone the liability until after death makes sense. But is it really about the good health of the old person or the inheritance of the children? (And what is Labour’s angle?)
So you discount £23k. What about £100k? Or a cool million? These people will be receiving a pension – basic, occupational, enormous – but can the care calculation really ignore whatever their savings might be?
If you have £30k, you’ll soon be down to the threshold and you can go into the scheme. And you’ll still be able to buy a newspaper.
“Pensioners with more than £23,000 savings ‘quite wealthy’, minister claims” and “Pensioners with more than £23,000 in savings and valuables are “quite wealthy”, a minister has claimed, as he defended plans to means-test a scheme to pay for elderly care” are the Telegraph headlines.
Purely as a matter of interest, could someone point out where in the body of the article Norman Lamb actually says that?
I’m worried that all these means-tested benefits add up to a pretty hefty aggregate rate of notional wealth tax for elderly pensioners who aren’t even that wealthy.
But can it be right that someone currently working full-time on the minimum wage should be taxed in order to ensure that someone else worth hundreds of thousands of pounds doesn’t have to pay towards their care costs?
No, but that isn’t the case. The government budget is not dependent on the taxes of people earning minimum wage.
@Matt
As far as I can see it is the case.
£23,000 is by a long chalk insufficient to justify a description of “quite wealthy”.
I don’t think so, Simon – their incomes taxes must pay 1/1,000th of the budget, or something like that. I think as a way of viewing political decisions it’s rather destructive – if it applies to a limit here of £23k it would apply to any such policy, even if it was £1k, or letting rich people use the NHS, on the other side you could argue that NMW earners shouldn’t pay VAT if any of the proceeds go to anything non-NMW people use etc. Nothing would ever be done.
£23,000 is a huge sum of money for most people. It’s also around the minimal amount of debt every student will graduate from university with. When they graduate they can look forward to the cost of living rising higher than their pay. Making the debt even harder to pay off. They can also look forward to their taxes paying the pensions and healthcare costs of the generation two above them, who have not contributed enough tax to pay for their current care. When this younger generation retire, there will be no money left and they will look with envy and disgust upon the pensions and healthcare their grandparents had, and which they subsidised in lieu of their own.
My only concern is the “whatever”… Cash and shares make sense, but what is considered alongside these needs some very careful thought.
Of course if you penalise a pensioner with thier own house and savings then of course there is no point in working and aqcuiring those things. I think that is unfair. A good friend of mine lives abroad – several ski holdays a year -lives well – he plans to retire back to the UK and let state support him. His reasoning is quite sound – better to spend the money now than have it taken off you inretirement.
I can’t help thinking of the phrase saving up for a rainy day. If you accumulate wealth throughout your life, surely you should be expected to spend it when you need care towards the end of it. That’s the rainy day, surely. There is something very wrong about taxing people on low incomes to the extent that many are being forced to turn to food banks for help while allowing people to discount tens of thousands of savings. I agree with Norman that the £23,000 limit is more in the ball park of where we should be.
@Caorn
But is it tens of thousands of savings or assets, would a car or caravan count in the whatever??
I ask this as a moderate family car is now worth anywhere between £10-£20K a 2-3 year old caravan £5-£10K.
It’s not the limit but what is considered. It may already exist, but perhaps an indicative list of exclusions would help.
Doh!
Caron not Caorn….
Sorry…
23k A lot for a pensioner, are you having a laugh!
Over 10 years, that’s less than £50 a week.
It’s stupid to look at this “big” pot of money and think of it like it’s some bonanza, it’s their income for the rest of their life.
@fake
“It’s stupid to look at this “big” pot of money and think of it like it’s some bonanza, it’s their income for the rest of their life.”
Incorrect. Their income is their income. You are talking about their savings.
Anyway, as I pointed out above Norman Lamb didn’t say that pensioners with savings of £23,000 were “quite wealthy”.
>£23,000 is a huge sum of money for most people.
Is it?
Save £50 a month for 40 years in ISA’s/Endowments (remember we are talking about pensioners) and it isn’t such a huge sum. Yes there may be people who are unable to save these amounts – but still able to find the money for Sky, or a new car every couple of years… I use £50 as this is the figure the government has used for its recent savings initiative.
As for the value of a house, its only value is what the pensioner can exchange it for. So does £247,000 (plus £23,000) buy a pensioner care and a roof over their head for the rest of their life? I think unlikely, as £23,000 doesn’t buy very much care even at minimum wages.
@Simon
>Incorrect. Their income is their income. You are talking about their savings.
Incorrect, ‘savings’ are only accumulated income that the person has chosen not to lock up behind an annuity/pension, as any competent financial advisor will tell you ‘savings’ should form part of your portfolio. A typical pensioner’s income will be a combination of pension and savings – as only a few can depend wholly on their pension covering all their needs throughout their retirement – remember pensions haven’t kept up with inflation etc. and so older pensioners are poorer than more recent pensioners and hence have to rely more on their savings.
Yes, Norman Lamb didn’t say that pensioners with savings of £23,000 were “quite wealthy”, but he very clearly implied this was the case.
The Telegraph ‘poll’ is not a poll, just those readers who decided to click a button. The Telegraph journalist is living in a typical journalist bubble (Richard Dyson follow up article 15/10) when he writes that some care homes ‘can come to £10,000 or more a year’. My late mother’s home (at the cheaper end) cost that for less than 4 months’ stay. You are talking more like £35-40,000 p.a. for care homes now.
Likewise some above seem a little too keen to grab the hard earned savings of elderly people who cannot help being infirm or having dementia, just like someone in hospital with a serious illness. If someone dear to her was lying in a geriatric ward for six weeks prior to their death, would she like to get a £4000 bill from the hospital?
Contrast the thrifty pensioners with those who blew all their annual incomes on pleasures and never saved a penny. Those latter get everything in a care home free, and of course grandchildren’s presents can be paid out of the £20 per week they are allowed to keep from their pension. What else are you going to do with that money, when one just sits in chair staring at the others? We must remember that the vast majority of demented elderly can hardly remember who they are, let alone who their grandchildren are. I’ve been through this several times with elderly relatives and I know of which I speak. It seems contributors have not – it’s hell, believe me and the financial injustice of taking away all that parents have worked and saved for should be rectified, as Lord Lipsey pleads and as we thought was going to happen.
I thought the DILNOT idea is that there should be a “cap” on what people pay, ie a limit.. this 23500 should be irrelevant
I am disappointed to see the government moving away from this raising the cap from 35K to 70K, which will effect a lot of people.
At the moment , government support for pensioners is skewed towards the rich through higher rate tax relief for pension contributions example. I would favour limiting tax relief to the basic rate and use the savings to pay for a lower threshold near the Dilnot figure of £35000. If scrapping pension tax relief does not raise enough, I suggest ending other tax breaks, particularly those who (or their families) are making use of tax havens.
@Roland
“Yes, Norman Lamb didn’t say that pensioners with savings of £23,000 were “quite wealthy”, but he very clearly implied this was the case.”
What word’s of Norman Lamb’s do you think “implied” that?
I read teh article and headlines as being a deliberate attempt by the Telegraph to distort what somebody said for their own political purposes.
Of course it could just be another Coalition financial scam? Old people’s houses up for grabs by institutional landlords, so reducing individual family’s private property and strengthening the wealth of the Establishment’s landordism? After all the Government doesn’t get the house for social use after sale,does it? “We want to buy your house, we want to buy your house…” I wonder why?
The idea of ‘saving for a rainy day’ manages to both hit and spectacularly miss the point.
The main issue is what this does to incentives; as already noted, if those without savings have their care paid for but those with saving shave to pay, then the rational thing for everyone to do is not save for the rainy day but spend it all on things which don’t provide assets — holidays, etc — or give it away, safe in the knowledge that when the rainy day comes the state will provide an umbrella.
You’re spot on, Stephen. One concern I have heard in vox pops with pensioners is that they want to hand on money to their children when they die. Fine, but I don’t see why average earners who don’t have rich parents should pay more tax so that these pensioners’ kids can inherit lots of money they didn’t earn.
Personally I don’t see why an elderly person who has gone to live in an old people’s home shouldn’t have their house sold and the revenue generated used to pay their care bills. They don’t need the house any longer and there are plenty of people who need a house to live in.
@Simon
The implication is clear, Lamb sets the scene by raising the question “If someone as well as their home has substantial other assets, money in the bank, shares or whatever, should they be expected to use those assets to pay for care?”, which is a totally valid question to ask and to discuss then goes on to mention “If together with owning your own home, you have more than £23,000-odd in the bank, the question is should you be expected to use that money. You are not forced to sell your home.” so the from the context the inference is clear.
Note, I am not saying that £23,000 is too low or high only that from the context in which Lamb is talking the inference is crystal clear, otherwise why mention this figure or lead up to it in the way he did?
*Incorrect. Their income is their income. You are talking about their savings.*
Sorry, but this is just pedantic.
They are pensioners, they don’t have income, they only have savings and pensions (ok, a type of income).
Their savings take the place of income, to be doled out over the years to pay for “stuff”.
So it’s completely inappropriate to look at 23k and go WOW, you look at that amount over time, over time it’s not much at all, and that’s before you start looking at inflation and rising costs.
Too many people (mostly young people), can’t see past it being a big pot of money.
*Fine, but I don’t see why average earners who don’t have rich parents should pay more tax so that these pensioners’ kids can inherit lots of money they didn’t earn.*
So if someone needs a hip replacement, your saying we should take the cost from their savings and property?
@fake
“They are pensioners, they don’t have income, they only have savings and pensions (ok, a type of income).”
So they do have income. Have you the faintest idea what you are talking about?
Income is subject to Income Tax. Savings are not (although any income arising from the savings would be).
@Simon
Yes savings aren’t subject to income tax, because they have previously been taxed!
I think fake really meant to say was that pensions/annuities are just a ring fenced form of savings.
The problem we have is fundamentally you get two choices either buy a house or rent – there is little difference between the monthly costs of these options, yet we wish to treat the people who chose to buy a house totally differently to those who chose to rent – a totally un-liberal stance.
@Roland
“Yes savings aren’t subject to income tax, because they have previously been taxed!”
Not necessarily (i.e. they may well NOT have been previously taxed), and that is certainly not the reason why they are not taxed.
Savings are not subject to Income Tax because they are not income. Amazing, isn’t it?
@Michael Parsons 17th Oct ’13 – 11:49am
I think within your comment there is a very valid point being made.
Having been through the house clearance and sale several times over the years with elderly friends and relations, what gets me is the total waste of capital and opportunity. When the typical elderly person in their 80’s or 90’s gets taken into care, their house will have been lived in for several decades with minimal maintenance, so will typically sell for a 30~50% lower price than neighbouring houses that have been recently ‘refurbished’.
Hence the real beneficiaries are those who can afford such houses and the time and money to ‘refurbish’ – costs that (in the south east) are typically a fraction of the discount.
So if the government were really being hard nosed and enterprising about this, they would buy the property, assist in the house clearance (help dispose the unknown/unwanted ‘gems’ through ebay’d etc.), refurbish it (using local small businesses) and then sell it (through local estate agents). As a liberal I would use the enhanced profits to benefit the elderly person/couple who have been taken into care, thereby reducing the amount of external state funding they need. Whether the property sale is open market or for social housing use is another, but important, discussion. The stupid thing is that such an approach is neither conservative nor labour/socialist, it is just common sense, which means that neither will do it, then complain that because the property sold for £120,000 rather than £247,000 they have received less tax (through stamp duty etc.) and hence will have to increase taxes to compensate…
Caron Lindsay
I can’t help thinking of the phrase saving up for a rainy day. If you accumulate wealth throughout your life, surely you should be expected to spend it when you need care towards the end of it
The issue is that some people live healthy lives and die suddenly when still resident in their own home, never needing much in the way of care. Other people develop conditions as they grow old which means they need residential care, but stay alive for quite a long time in this situation, and it is a very expensive one. Whether one falls into one category or the other is pretty arbitrary. Isn’t the point of our NHS and welfare system that people should not have an arbitrary financial penalty imposed because of some health issue which is not of their choosing? Isn’t the point to equalise things, instead of making people who fall sick pay for it?
Now, sure, the free market people will say that we can have private pension policies and insurance which will do the evening out. But, come on now, after all the financial product mis-selling scandals we’ve had in recent years, is that REALLY a better solution? Free market theory says competition drives up quality, but that didn’t happen here. How is it going to happen when we are dealing with products which are not goods you can examine on a market stall, but abstract things whose real value will not become apparent for many years after they have been purchased? The reality is that people buy them from whichever company has the pushiest sales-people, nothing to do with quality. If it’s about long-term reputation, then how come the names of the companies keep changing? I have a few such policies, and they’ve all gone through so many company mergers and name changes that I often look at my bank statement, find all these direct debits going to things I don’t recall signing up for, and then have to remember all those changes over the years. We’ve had pension selling scandals, endowment mortgage selling scandals, PPI scandals, and none of them seem to have had any effect in “driving up quality”, what they really do is indicate just how badly wrong simplistic free market theory is.
Right, so instead of taking a big chunk out of what would be the inheritance for one person because that person’s parents needed a lot of old age care, and nothing from the inheritance of the person whose parents both died of sudden heart attacks, why not even it out with an inheritance tax to pay for residential care?
@Simon
I would like to see an example of savings that haven’t previously been taxed or assessed for tax as this sounds like a potentially lucrative tax loophole – perhaps I could get paid in ‘savings’ and hence have zero income for tax purposes…
Is there not a difficulty that as soon as any politician begins to talk about pensioners having to face their fair share of austerity, the blue and red warning lights start flashing? Rightly or wrongly, any politician targeting the elderly faces a huge onslaught in the media, and likely in the polls.
How else could we justify removing EMAs and raising tuition fees while leaving winter fuel allowances, free bus passes and TV licences in place?
How else could we justify the pensions triple lock while cutting on careers advice?
Or excluding pensioners from welfare savings such council tax benefit or size criteria?
It wasn’t young people who caused the economic crisis, it was those who were reckless in high-powered financial jobs, many of whom are fast heading to retirement. We need to be stronger in the debate that the older generation have had a much more comfortable ride through austerity than many of their children and grandchildren, and we shouldn’t be afraid to make the case. But what we really need is for younger people to vote in numbers. At the moment, the grey vote is untouchable due to it’s size and commitment to vote. It’s time for younger folks to get involved and redress the balance; then it becomes possible to have these debates.
Roland,
I think your idea of Local Authority refurbishing of properrty is a good one. Whether the property sale is open market or for social housing use is another, but important, discussion, Properties may continue to be owned by care home residents during their lifetimes and the rents derived from letting to housing benefit recipients can go a long wat to defraying care home costs. Relatives could retain the choice of selling to the local authority or into the private market from the estate. Either way capital expenditures incurred by the Local authority in preparing the properry for letting would be recouped on sale of the property at death.
*So they do have income. Have you the faintest idea what you are talking about?*
Do please continue to attack singular sentences and poorly chosen words, rather than the overall message, it says a lot about you.
It may be a big pot of money, but it is to be doled out over time, in small parcels, as a “form” of income, that’s all pensions and savings are, money set aside to replace “income” from a job.
Yet somehow when it’s cash, rather than a pension, people seem to think it’s up for grabs.
Is anyone suggesting we should confiscate someones private pension to pay for care?
If not, why not, it’s the same thing!
@ fake
Why aren’t private pensions confiscated to pay for care? The cynic in me thinks it’s because the private pensions industry helps to fund donations to political parties that are several orders of magnitude more than Jo & Joe Bloggs’…
Practically though, the insurance industry will have probably scared governments off from doing so because of the changes in insurance/pensions legislation and returns on the invested funds (almost certainly in a downwards direction) that such a proposal would entail. The capture of part of such an asset would certainly depress investment returns and so further depress the annuity rates on offer which would have the politically undesirable effect of yet more people making little, if any, provision for their retirement beyond the state pension. (Politically undesirable because over time politicians of all hues have tended to reduce the real terms value of the state pension. If too few have other sources of income in retirement, then the cost of means tested benefits & their administration will wipe out a lot, if not all, of the projected savings to be made by further reducing the real terms value of the state pension.)
@Roland
“I would like to see an example of savings that haven’t previously been taxed or assessed for tax as this sounds like a potentially lucrative tax loophole”
How about:
– Money that you have been given e.g. by kindly great aunt
– Money that you have inherited
– Money that you have saved from “Saturday jobs” as a teenager
– Money that you have saved from a part-time job as a student when you didn’t earn enough to pay tax
– Money that you have been given as “housekeeping” by children who still live at home
I am merely pointing out that you are factually incorrect when you claimed that the reason why savings aren’t subject to income tax, is “because they have previously been taxed”.
@John Broggio
Why aren’t private pensions confiscated to pay for care?”
I think they are (effectively).
If you have sufficient income (e.g. from private pensions) then you pay for the cost of care,
“How about:
– Money that you have been given e.g. by kindly great aunt
– Money that you have inherited
– Money that you have saved from “Saturday jobs” as a teenager
– Money that you have saved from a part-time job as a student when you didn’t earn enough to pay tax
– Money that you have been given as “housekeeping” by children who still live at home”
*Applause*
You are a master of the pedantic, a suave debater of irreverent side points.
*bow*
@Simon
– Money that you have been given e.g. by kindly great aunt -> Subject to IHT
– Money that you have inherited -> subject to IHT
– Money that you have saved from “Saturday jobs” as a teenager -> monies received from “saturday jobs” is subject to income tax
– Money that you have saved from a part-time job as a student when you didn’t earn enough to pay tax -> earnings from part-time job subject to income tax
– Money that you have been given as “housekeeping” by children who still live at home -> Subject to income tax
Obviously, provided HMRC’s conditions are complied with (eg, income less than then personal allowance) such gifts and income do not have to be declared as no tax is payable. However, all are subject to tax and hence should be assessed, albeit as the sums involved are normally small HMRC don’t require formal assessment.
I think, like many, you have fallen into the trap of thinking that because the payments are usually small and hence no tax becomes due, that they aren’t subject to tax. And Yes I know I’m being pedantic.
23K would pay for utilities and council tax for how long exactly?
Tpfcar says :
“At the moment, the grey vote is untouchable due to it’s size and commitment to vote. It’s time for younger folks to get involved and redress the balance; then it becomes possible to have these debates.”
But the grey vote is ‘eating the young’, so why would ‘the young’, bother to debate with pensioners who have done Ok by the standards of the last 40 years (thank you very much).?
The young, who are educated, mobile and smart, will do an ‘Atlas Shrugged’, and exit to New Zealand Australia, Iceland and Canada. And good luck to them. The unsustainable, Grey Ponzi schemes are coming to an abrupt end, and the young know it, and will not stay around to discuss or debate it.
Why would they?
Can someone please explain why it is alright that up to the age of 65 an ill person who cannot support themself is not allowed to have significant savings or assets without losing state support but a 66 year old with assets of £100,000 plus will receive significant help.
Can someone also explain why it isn’t all about the childrens inheritance.
Oh to live in Scotland