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    • shortcrust
    • By shortcrust 20th Sep 16, 1:20 PM
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    shortcrust
    Immediate Needs Annuity - where to start?
    • #1
    • 20th Sep 16, 1:20 PM
    Immediate Needs Annuity - where to start? 20th Sep 16 at 1:20 PM
    I'm interested in setting up an immediate needs annuity* for my grandma. She's 98 and currently in excellent health (dark pacts and ageing portraits are suspected...). Who would be my first port of call? Any financial advisor or would I have to go more specialist? I'm sure it depends on lots of factors, but can anyone give me a ballpark idea of how much we'd need to pay to get a monthly payment of £2,500 for care home fees?

    *in case I'm being thick, my understanding is that we pay a lump sum and they cover care costs for the rest of her life. Right?
Page 1
    • Malthusian
    • By Malthusian 20th Sep 16, 2:37 PM
    • 952 Posts
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    Malthusian
    • #2
    • 20th Sep 16, 2:37 PM
    • #2
    • 20th Sep 16, 2:37 PM
    98? Congratulations to your grandmother for keeping herself in such excellent shape, but you are running a very high risk of giving an insurance company free money.

    How likely do you think it is that she would run out of money if she lived longer than expected?

    I honestly don't know what a ballpark figure would be - in any case immediate needs annuities are individually underwritten, and must be taken out via an adviser.
    *in case I'm being thick, my understanding is that we pay a lump sum and they cover care costs for the rest of her life. Right?
    They pay a fixed amount to the care provider which will be agreed at outset, and which usually escalates each year. There is no guarantee that this will actually cover her care costs if your grandmother's needs change, or if the care home increases its costs by more than the escalation factor. But the risk of these two things diverging is quite small relative to the much bigger risk, i.e. of your grandmother dying before she gets her money back.
    • Silvertabby
    • By Silvertabby 20th Sep 16, 2:41 PM
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    Silvertabby
    • #3
    • 20th Sep 16, 2:41 PM
    • #3
    • 20th Sep 16, 2:41 PM
    Malthusian beat me to it. Your gran may be in 98 and good health, bless her, but she is very unlikely to see 102. I would fund her fees from her capital.
    • shortcrust
    • By shortcrust 20th Sep 16, 2:57 PM
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    shortcrust
    • #4
    • 20th Sep 16, 2:57 PM
    • #4
    • 20th Sep 16, 2:57 PM
    Thanks for the replies. Will have a good think. Because she genuinely seems to have got five years younger since moving in to the home it's easy for me to imagine that she's going to live for another 10 years, but I suppose things can and do change rapidly at her age.
    • xylophone
    • By xylophone 20th Sep 16, 2:58 PM
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    xylophone
    • #5
    • 20th Sep 16, 2:58 PM
    • #5
    • 20th Sep 16, 2:58 PM
    Friends Life

    Partnership

    Just Retirement

    The above used to offer these annuities - you'd need to check on the current situation.

    As I understand it, these plans are not sold direct to public - you need an IFA intermediary.

    http://societyoflaterlifeadvisers.co.uk/

    The IFA would presumably obtain quotes from all three - I remember reading somewhere that there can be quite a difference.

    The IFA would also explain the various terms and conditions and this would enable you to decide whether such an annuity would suit the circumstances.
    • Linton
    • By Linton 20th Sep 16, 3:59 PM
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    Linton
    • #6
    • 20th Sep 16, 3:59 PM
    • #6
    • 20th Sep 16, 3:59 PM
    Malthusian beat me to it. Your gran may be in 98 and good health, bless her, but she is very unlikely to see 102. I would fund her fees from her capital.
    Originally posted by Silvertabby
    "Probably not" rather than "very unlikely" I would say. According to the ONS life expectancy data a female aged 98 in 2016 has a life expectancy of 2.6 years, and if she reaches 100 in 2018 the life expectancy is a further 2.3 years.

    To decide whether a care annuity is worth buying you really do need to get a quote.
    • shortcrust
    • By shortcrust 20th Sep 16, 4:12 PM
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    shortcrust
    • #7
    • 20th Sep 16, 4:12 PM
    • #7
    • 20th Sep 16, 4:12 PM
    ...To decide whether a care annuity is worth buying you really do need to get a quote.
    Originally posted by Linton
    I think I will. I'll post back here if/when I do.
    • bowlhead99
    • By bowlhead99 20th Sep 16, 5:16 PM
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    bowlhead99
    • #8
    • 20th Sep 16, 5:16 PM
    • #8
    • 20th Sep 16, 5:16 PM
    I would be curious as to the costs as well. Although life expectancy is probably under 3 years or so, my grandma's 100-yr old friend doesn't really seem any closer to death's door than she did a couple of years ago, and another friend of hers almost made it as far as getting a second birthday card from HM the Queen (at 105).

    It is tempting to say 'fund it from the capital, you won't be doing it long' - but at £30k+ a year of fees, living to 105 when you'd only budgeted to live to 100 is the kind of thing that could make a very serious dent in capital. If by buying an annuity you can guarantee to only pay for 4 years against an expectation of 3, but maybe get 6 or 7 out of it, it wouldn't be the worst gamble in the world. Whereas if they said it would cost you 7 years fees because there's a remote possibility she'd need them for 15... then I don't think I'd be a buyer!

    As a side note, thinking about OAP life expectancy is tricky and it's easy to accidentally be tactless. You end up saying things like 'unlikely but worst case scenario, she lives another 10 years', meaning from the perspective of needing to find the cash to cover it that might be the worst case scenario. But if the person concerned has decent health and mental capacity she is unlikely to agree that her still being alive in a few years is a 'worst case'
  • jamesd
    • #9
    • 20th Sep 16, 6:00 PM
    • #9
    • 20th Sep 16, 6:00 PM
    She's 98 and currently in excellent health
    Originally posted by shortcrust
    One thing about immediate needs annuities is that they are really products more for those who have been forced into care by ill health. They would tend to have a break even life in ill health of perhaps 3-4 years while the life expectancy given ill health was 1-2 years. given her good health the purchase price might be substantially more than the cost of 3-4 years of the 2,500 a month needed.

    If she, or you, have assets that could be invested it's worth noting that after bad debt losses and before income tax I currently anticipate receiving something like 10% a year on peer to peer money invested via places like Ablrate and MoneyThing. That can go some way towards helping with affordability without a guarantee that the capital is spent. As with all investments the results are not guaranteed and in this case there is no FSCS protection against such things as fraud by the P2P platform. Diversification between platforms and across loans within each platform is how you protect against such risks. For many of the platforms including the two I mentioned it's easy and free to sell at any time, subject to there being buyer demand, which usually is sufficient to allow quite rapid selling.
    • LHW99
    • By LHW99 21st Sep 16, 11:04 AM
    • 440 Posts
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    LHW99
    Whilst she is in good health for 98 years, if she needs some assistance / care, is she getting attendance allowance? There are two levels based on need amd it is not means tested.
    • kkgree1
    • By kkgree1 22nd Sep 16, 12:51 PM
    • 262 Posts
    • 133 Thanks
    kkgree1
    We took out an immediate needs annuity for my mother-in-law earlier this year. We were pleased with the service we got from a specialist adviser (please PM if you want details). The adviser we spoke to had dealt with similar cases before and will be able to give you a ballpark figure before you decide whether you want to go ahead with a quote.

    There are only 3 companies that offer these annuities and the quotes we received varied significantly (by 30k in one case). The quote is based on a medical report by the GP and also an assessment by the care home manager.

    My mother-in-law is only 72 but in poor health and has a long-term condition so it is different. At 98, I'd be looking for a ballpark figure first to see if it is worth continuing to quote stage.
    • shortcrust
    • By shortcrust 22nd Sep 16, 4:36 PM
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    shortcrust
    Thanks everyone, I'd almost forgotten to check back.

    She does get attendance allowance (I need to check if she can get the higher rate), and she does have a long list of medical conditions which I can never remember. I guess when I say she's in excellent health I mean that she's still got all her marbles, can feed herself and is mobile over short distances with a stick. I also mean relative to many of the others in the home. However, I realise it's easy to lose perspective - she was still driving herself to sainsburys four years ago and dealing with the garden all by herself so in many ways there's been a big deterioration. She's got enough capital to see her to 104, but I keep thinking about my other grandmother who died younger but lived many years after reaching the sort of stage my gran's at now.
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