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Council tax hike looms to cover escalating care costs

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Written by: Paloma Kubiak
15/12/2016
Local councils have been given the go-ahead to raise tax bills further over the next two years to help cover the burgeoning costs of adult social care.

In 2016/17, local authorities have been allowed to increase council tax by up to 2% (a precept) to fund adult social care.

But the secretary of state for communities and local government, Sajid Javid, today announced that local councils in England will be able to raise the tax by up to 3% in 2017/18 and 3% in 2018/19 in a bid to raise more than £650m for adult social care over the next two years.

For an average Band D property paying council tax of £1,530, they will see their bills rise by nearly £46 next year.

However, as local authorities are also able to increase council tax by up to a further discretionary 2%, some people could face even higher bills.

Steven Cameron, pensions director at Aegon said the current care cost crisis should be a wake-up call to younger generations to plan ahead and for the government, it should prompt a move to allow individuals to save more into a pension.

“For an increasing number, paying for social care will be a substantial part of their spending in retirement. For those planning ahead, saving through pensions offers the best solution. From age 55 onwards, individuals can now take as little or as much as they like out of their pension and tax rules which used to penalise those who left large pension funds on death have been made fairer. Together, these changes mean pensions are now well suited to fund not just ‘typical’ retirement years but also social care if needed in later years.

“But the government recently cut the total amount that can be built up in a pension to £1m. While this seem high, it might generate an income of around 25,000 a year before tax, which is less than the cost of social care. As part of an approach to encourage greater self-funding of social care, the government needs to scrap the pension lifetime allowance.”

See YourMoney.com’s Will I have to pay my own care home fees for more information.

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