- +

Care fees annuity

Purchasing a care fees annuity (sometimes referred to as an ‘immediate needs annuity’) is a genuine alternative to meeting care costs directly from capital or investments. These are plans which have been specifically designed to take into account the age and state of health of an elderly person who requires personal or nursing care.

Care fees annuities are purchased from an Insurance Company with a one-off lump sum payment (usually from your investments, savings or property sale proceeds), which is non-refundable unless some form of capital protection is included. The income paid out by the Insurance Company is then paid for the rest of your life, leaving your remaining capital ‘ring-fenced’ from future care costs. The income is tax-free.

This type of policy offers a guaranteed method of meeting the fees for life, although the risk they carry is that capital could be lost if you do not need care for as long as the Insurance Company had predicted, unless you choose to add some level of capital protection or buy the plan with a deferred start date as described on the next page.

Any money spent on the care fees annuity will immediately reduce your estate for the purposes of any Inheritance Tax calculation. The amount of income paid out each year can remain the same or it can increase by a fixed percentage, or even by the rate of inflation – you choose. If you move care homes, the plan simply moves with you.

Care Fees Annuity calculator – Eldercare Group
Request a Care Fees Annuity quote
Care fees annuities peace of mind
Peace of mind

Provides a guaranteed method of meeting care home fees for life.

Care fees annuity protection

Ensures future inheritance by avoiding use of capital or investments.

Care fees annuities safety & security
Safe & secure

CFA’s are highly regulated and covered by the FSCS compensation scheme.

Care fees annuity tax efficiency
Tax efficient

Reduces your estate for the purposes of Inheritance Tax calculation.

Counting the savings from a care fees annuity

Care fees annuities costs

There are a variety of options available with care fees annuities enabling them to be highly tailored to your needs. The cost would depend on your specific circumstances, click here to request an indicative quote. We always recommend that you use as much of your pension or other income as possible to pay towards your fees so that the income you require from the plan is kept to a minimum. The older you are or the more dependent you are on others for your care, the lower the cost.

To make provision for potential rises in care costs, you can either include some form of indexation within the annuity (at additional cost) or, if you have a reasonable amount of capital left over after purchasing the plan, you can consider using this to cover potential fee increases. It’s always best to obtain fully underwritten quotes whereby medical information is obtained from your GP and your care needs are confirmed by your care home or agency. Making decisions about the viability of care fees annuities based on ‘guesstimates’ could mean the wrong decisions are made.

Underwritten quotes from the whole market

What happens to the money on death?

You can pay extra and have anything between 25% and 75% of the capital returned to your estate on death (less any money already paid out to the care provider). Alternatively, you can purchase a care fees annuity on a ‘deferred’ start date basis which means that you still buy the plan now but defer the date the income starts paying out from. This makes the plan much cheaper to buy but still offers financial protection in the event of longevity.

For example, if an immediate care fees annuity were to cost £100,000 for a £20,000 annual level income then a 3-year deferred annuity may only cost £40,000, saving the estate an initial outlay of £60,000. You would still have to cover the £20,000 shortfall yourself for each year of the deferred period (plus any fee increases) so, by the beginning of year 4 the total cost would still have been £100,000, but in the event of early death, some of the ‘self-pay’ money will be in the estate and not lost to the Insurance Company.

It’s difficult making financial arrangements on somebody else's behalf but Eldercare were so patient throughout the process. I cannot fault our dealings with this Company, which resulted in the purchase of a Care Fees Annuity for our relative, giving us complete confidence and peace of mind that he can stay in the Residential Home he is so happy in, for the rest of his days.

Customer in Essex

Having contacted other ‘specialists’, I felt that Eldercare provided the clearest advice about Care Fees Annuities. The information was precise, balanced and I was not pushed to look at other financial products. I valued having a contact always available at the end of the phone with whom I could discuss my queries, which were dealt with in a compassionate and caring manner.

Mr J Morse

Having my mother suddenly need to be in a Care Home was a shock to the system and the cost implications left us very concerned what the long-term position was going to be. Thankfully I was put in touch with Eldercare who helped guide us through the options. Now that we have a financial plan (and therefore a permanent solution) in place, I can rest easily.

Mr Davies, Cambridgeshire

Having purchased a Care Fees Annuity, all I can say is that Eldercare were highly professional and efficient throughout the whole process. I would recommend any family with a loved one entering a Care Home to call them. I can assure you it will be worth it. Without their specialist advice, it is highly unlikely that the best funding solution will be found.

Customer in Norfolk

About us Specialist advisors here to help
Read more
FAQs Your questions answered
Read more
Contact Eldercare Group for care home finding & care fees annuity advice
The Eldercare team are here to help!
Call: 01438 360082 or 0800 082 1155
Email: advice@eldercaregroup.co.uk
Claim Attendance Allowance
Claim Attendance Allowance
Read more
Find your Local Authority
Find your Local Authority
Read more
Find a Solicitor
Find a Solicitor
Read more
Caring for someone yourself?
Caring for someone yourself?
Read more

Achieving the Later Life Adviser Accreditation (LLAA) and becoming a member of the Society of Later Life Advisers (SOLLA) is an endorsement of our skills and experience of working with, and understanding the needs of, older people, their families and carers. It is widely recognised as the Gold Standard in later life financial advice.