Use your pension savings or pension drawdown

 

Paying for care using all or some of your pension funds can be a good option if you have other assets to fund your retirement income at an acceptable level.

To consider this approach, you’ll need to be aged 55 or older, and have pension savings that:

  • could be moved into a drawdown product, or
  • are already in a drawdown and aren’t needed to fund other costs or to provide income.

 

Advantages of using drawdown

  • The pensions ‘death tax’ – a 55% charge – has been scrapped. This makes keeping pension funds into later life to pay for care a more attractive option.
  • By moving your pension funds into a drawdown product you can ‘top up’ your care fee payments, drawing smaller amounts rather than taking large lump sums. This approach spreads withdrawals across tax years to help with tax efficiency.

 

Disadvantages of using drawdown

  • If you don’t have another way of funding your retirement or you need to use your pension income to help top up your spouse or partner’s retirement income, then this approach will leave you short of income.
  • Withdrawals will be taxed as income at your marginal rate. This means that big drawdowns could push you into a higher tax bracket. For example, you might take a drawdown of £50,000, to pay for major adaptations to your home.
  • If you need to pay for care over a considerable time, this route could decimate your pension funds. This means you could run out of money.

 

Find a care fees adviser

If you’re considering using your pension savings to pay care fees, we recommend you take specialist care fees advice. A qualified and experienced adviser will:

  • be able to discuss the best ways to protect your assets
  • look at how to make sure your money lasts for as long as is needed
  • let you know about products specifically designed to help with paying care costs.

Find an adviser

Use our directory of specialist care fees advisers to find expert advice in your area.