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24 Feb 21
Care Fees Annuities
Care fees planning is a complex area and many people are not aware of the range of options that may be available to them. Our Director and SOLLA accredited later life adviser Mark O’Neill explains how he helped a client pay for their care.
What was the situation?
Jean was referred to me recently as she required specialist advice regarding her father whom she acts as attorney for. John is 83, widowed and suffering from dementia and Parkinson’s disease.
John was living with family until he recently moved into residential nursing care. He has cash savings, a modest investment portfolio and investment property totalling £295,000.
However, when it came to paying for residential care, despite having a total income from Pension, rental income and benefits of £36,000 a year, there was still a shortfall of £16,760.
Jean’s priority was that her father wouldn’t run out of money and could continue to self-fund care for the rest of his lifetime. This will help her to retain more control and independence over his care requirements. She was looking for a risk adverse, guaranteed method of meeting John’s income shortfall. Also, John still wanted to be able to leave a legacy to Jean and her children if possible.
What was undertaken?
I produced a Care Fees Planning report with advice upon various ways to fund John’s income shortfall. An Immediate Needs Annuity (INA) was recommended at a cost of £88,009. This pays a guaranteed income for life (tax free if paid to a CQC registered care provider).
The income increases by 5% annually to guard against inflation and a capital protection option guarantees that at least half of the premium is either paid out to the care provider as income, or the difference to this protected amount returned to John’s estate upon early death.
Access to the capital is lost once the INA is purchased. However, as a by-product of this advice, two thirds of John’s assets remain which can be invested for growth for unplanned needs and future inheritance.
By taking this advice, Jean gained peace of mind and certainty in minimising the risk that her father could outlive his assets.
Do you know anyone that we can help?
For many years, our advice has helped clients, their families and attorneys with recommendations upon how to structure assets when planning for care.
Crucially, INA’s are fully protected by the Financial Services Compensation Scheme (FSCS) and as independent advisers we obtain costs from all providers in the marketplace and recommend the most suitable contract.
It is essential that care fees advice is regularly reviewed to ensure that planning remains suitable.
For illustration purposes only. Any resemblance to actual persons is purely coincidental. Advice should always be taken from a suitably qualified Independent Financial Planner and Long Term Care advice specialist.