Pensions for care plan 'does not go far enough'

Government proposals which could reduce the risk of pensioners being forced to sell their homes to pay for residential or nursing care met with hostility yesterday for failing to go far enough.

The plan, which the Prime Minister is likely to want included in November's Budget, would adopt a change to the Inland Revenue rules allowing a transfer of assets from pension funds to meet the costs.

Concern has been spreading in the Government's ranks that the existing regulations were alienating a natural Tory constituency.

But the proposals were immediately greeted with disdain by Opposition politicians, although the charity, Help the Aged, conceded that the move would represent a step in the right direction.

Ministers are considering the plans to enable people to transfer assets currently outlawed under Inland Revenue rules. Since the introduction of the 1990 Community Care Act, pensioners with assets of more than pounds 8,000 have had to pay for the costs of care themselves.

The strain on pensions is expected to worsen considerably as the number of pensioners is projected to rise by 50 per cent in the next 40 years.

David Shaw, vice-chairman of the Tory backbench finance committee, said: "The Prime Minister has been very concerned that people should be able to not only save for retirement but to save for the risks that they face in retirement. That would give people the benefit that they would be able to keep some of their savings back to pass on."

But Help the Aged said only one pensioner in 10 would benefit from the proposals. Mervyn Kohler, its spokesman, said the measures under consideration would only help those well-off pensioners who already had occupational pension schemes.

"It is a comfort that the Government is considering support for older people. However, if ministers are going to do more than lift deck chairs around the Titanic, they must produce a core strategy and decide whether individuals should fund care from their own pockets or whether it should be addressed by society."

Frank Dobson, Labour's environment spokesman, said: "It is yet another of these Tory efforts to give the impression they are doing something, because they recognise there is some public concern."

Mr Dobson also condemned the "Tory betrayal of homeowners" with the news of new figures reflecting the fragile state of the housing market. They showed another sharp fall in mortgage lending by the high-street banks in July. New loans made by the banks for house purchase fell by a fifth .

Tim Sweeney, director general of the British Bankers' Association (BBA), said: "Even by recent standards July was a very poor month."

The continuing evidence of housing-market weakness is expected to weigh heavily with Kenneth Clarke, the Chancellor, at his monthly meeting next Thursday with Eddie George, Governor of the Bank of England.