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Care Fees Annuity
Care Fees Annuities are designed to pay an agreed amount of income directly to the care provider tax-free for as long as it is required. This has the aim of taking the worry out of being able to continue to afford care for the future. They are sometimes also called “Care Fees Annuities”.
The income is paid in return for the company receiving a single premium (or lump sum). They are based on the concept of a specialist impaired life annuity and are offered by expert life insurance companies specific to this area of financial planning. The size of single premium and resultant income is calculated on an individual basis – with the main factors being age, sex and benefit required. It will also include a full medical assessment of the person needing care.
The Immediate Needs Annuities are designed to: -
• Ensure access to quality of care
• Give you choice of care
• Cap the cost of care
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Provide peace of mind for ongoing care fees payment
The income can be paid direct to the care provider – whether the person is receiving residential care or domiciliary care in their own home. Payment direct to the care provider enables these to be made tax-free.
Later Life Matters Limited help families, carers and Attorneys to arrange care fees annuities, which are designed to ensure that the chosen care can continue indefinitely. This helps to reduce the overall cost of care fees and the resultant impact this has on a person’s estate.
These types of Annuities can be used to provide income to fund the full costs of care or to provide additional monies to top fees up. This might be needed if the bulk of the monies have been provided from other sources (subject to a financial assessment).
Why is it important to consider care fees annuities?
Current records show that approximately one in three people will need long term residential care at some stage in their lives. The costs for this can be extremely high.
The average cost of residential care in the UK is now estimated to be £24,908 a year (or £479 per week). This can rise to £34,788 a year if nursing care is also required (£669 per week).
Laing & Buisson, Care of Elderly People, UK Market Survey, 2009.
In addition, it is also very difficult to know how long care will be required for.
Many people who find themselves needing to move into residential care, their families, carers and Attorneys, often do not have a clear idea about how to find help in meeting these costs.
If you simply try to meet the cost out of savings, it is highly possible that the money available may beseriously eroded or even worse, a change in care or a move to a lower cost care home may be required, particularly if the person needing care lives longer than expected.
It is important to remember that there are options that must be considered when arranging residential care and how this will be paid for.
One option that has been developed over the years is the Immediate Needs Care Annuity (these are also sometimes called “Long Term Care Annuities”).
Immediate Needs Annuities are only available to people over 50 who find themselves needing care immediately, whether that’s care in a residential care home or in their own home (domiciliary care).
Immediate Needs Annuities are not available for people who wish to plan for the possibility of paying care fees in the future.
Some companies offer “Deferred Annuity Plans”. This is where the payment is made up front and then payments begin after a set period ie from 1 to 5 years. However, these are usually only considered when a person still has an immediate need for care, but the facility to fund their own care for an initial period. The annuity will then start to be paid direct to the care provider once the deferred period has ended and the person’s own monies have been used up.
The plan can be set up to include automatic increases each year so that your payments rise in line with inflation or a set percentage which may help protect against any possible increases in fees that the care provider may implement. Please note it is always possible that the care provider will increase fees over and above the automatic increase if selected within the annuity, but it may provide some help towards this.
Immediate Needs Annuities are also tax efficient. As long as the benefits are paid directly to a registered care provider, they are tax-free. This means that the income they produce does not increase the person’s income tax liability or Age Allowance. This route also means that the Immediate Needs Annuities cost less than an ordinary annuity, which may provide the same benefit amount.
Immediate Needs Annuities can also be set up to include an element of capital protection. This helps overcome the possibility that death could occur shortly after the premium is paid. For an additional premium you could protect up to 75% of the premium paid, minus benefits received by the time of death, which would then be returned to the estate.
How much does an Immediate Needs Annuity cost?
As previously mentioned, the Annuity is tailored to an individual’s own circumstances and based on their sex, health, age and the income that you need to provide. If you would like us to obtain an illustration on your behalf, please contact us and we will be happy to help you.
We will be able to take some background information and then provide a confidential medical questionnaire for your completion and return. This will enable us to research the best quotes for you.
If you would like to discuss the advantages and disadvantages of Immediate Care Needs Annuities, please do not hesitate to contact us.
It is important that when considering care fees planning, that all options should be considered and bespoke illustrations are obtained to meet your exact requirements.
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