These Care Fees Annuity plans 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.
Peace of mind
Provides a guaranteed method of meeting care home fees for life.
Protects
Ensures future inheritance by avoiding use of capital or investments.
Safe & secure
CFA’s are highly regulated and covered by the FSCS compensation scheme.
Tax efficient
Reduces your estate for the purposes of Inheritance Tax calculation.
"Responsive, friendly & reassuring service offering clear, jargon-free advice"
"Responsive, friendly & reassuring service offering clear, jargon-free advice"
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 result in a wrong decision.
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.
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Email: advice@eldercaregroup.co.uk
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