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24 Feb 21
Paying for care - the dilemma
The Local Authority means-test threshold is currently £23,250 in England, writes Mark O’Neill, FPFS, True Bearing Director & Solla Accredited Later Life Adviser. Many True Bearing clients are increasingly aware that they may be facing the prospect of funding their own care if required in later life if their assets are above this figure. The value of their home is ignored in certain circumstances, most commonly if a spouse still lives in it (assuming NHS Continuing Care criteria is not met).
Understandably, more people are concerned that with some care homes costing over £1,000 per week, their hard-earned assets face a potentially open-ended erosion. Worse still, a self-funder might have to fall back on state resources where they could lose control over the quality, location, and standard of their care.
Life expectancy for men and women already aged 85 is over 91 and 92 respectively**. It is no surprise that as a percentage, the over 85 cohort is the fastest-growing sector of our population***.
What is a care fees annuity, and how does it work?
Sometimes called an Immediate Needs Annuity, this is a type of insurance policy for people who need care immediately. You pay a lump sum, and it pays out a guaranteed income for life, which can be tax-free if paid to a CQC registered care provider (for residential or domiciliary care).
Options are available to index the payments to guard against inflation and to guarantee a minimum sum is either paid out to the care provider, or the difference to a protected amount returned to the client’s estate upon early death.
Individual underwriting is required, and unlike life cover, for instance, where premiums increase with age and medical conditions, the cost of a care fees annuity reduces with age and adverse health.
Is a long term care annuity a good idea?
While not a panacea, we believe that they should always be considered and costs obtained. We then include this within a Care Fees Planning report, which is a specialist service True Bearing can provide. For many years, our advice has helped clients, their families, and attorneys with recommendations upon how to structure assets when planning for care.
Essentially, a care fees annuity can give peace of mind and certainty as it can minimise the risk that someone could outlive their capital by purchasing a guaranteed income stream for life.
Crucially these policies are fully protected by the Financial Services Compensation Scheme (FSCS).
Whilst there are several providers in this marketplace, as independent advisers, we obtain costs from each and recommend the most suitable contract where suitable.
**Source: Office for National Statistics. Projected expectations of life from the 2014-based national population projections, principal projection for the UK; cohort life expectancy, for males and females, at the ages shown in 2017; published 11 December 2015.
***Source: Age UK Later Life in the United Kingdom April 2018 Report