Care Home Fees Immediate Needs Annuity

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
42 replies 17.4K views
JacksonMJacksonM Forumite
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Hi, this is my first post here and it's about my 85 year old mother. She has just gone into a care home and the fees are unbelievable. She is over the threshold for local authority funding and will soon get through her life savings. Leaflets from a charity called Care Aware put me in touch with an Independent Financial Advisor about annuities and he advised that if she buys an annuity with some of her savings (just over 150K) then she won't have to worry about fees ever again and it would mean that she should still have some capital in the bank. Also, if she passes away before she starts to benefit from it, then all the annuity will be gone. That's fine but
my question is: he tells me only 3 companies offer this service and we must go through him. We cannot approach them ourselves. He tells me that we have to pay £3,500 just to find out how much it would cost. He would set up a meeting with us and then get prices from the 3 companies. That seems a bit steep to me and it seems funny that we can't shop around ourselves.
Is this the only option if we want to buy an annuity? And from reading bits on the internet it seems to be only a few people that actually do it, so generally speaking is it a very risky strategy?
Many thanks.
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Replies

  • LHW99LHW99 Forumite
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    Make sure your adviser is a member of SOLLA : see
    http://societyoflaterlifeadvisers.co.uk/

    He is right that you have to buy via an adviser, and that there are only a few companies that offer the immediate care needs annuities.

    You may need Power of Attorney, unless your mum is able to understand and sign the paperwork. There will be fees, and someone more experienced will be able to say if what you are quoted is reasonable.

    Also I think some policies either return something, if the person passes away after a few months, but this is something the adviser should be able to tell you about.
  • xylophonexylophone Forumite
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    https://www.moneyadviceservice.org.uk/en/articles/immediate-need-care-fee-payment-plans

    http://www.sharingpensions.co.uk/annuity_immediate_needs.htm

    http://www.medicp.co.uk/DOc/Care%20Fee%20Payment%20Plan%20Questionnaire.pdf

    Looking at the above it would seem that the three providers are

    Friends Life (Aviva?), Partnership and Just retirement?

    http://www.justretirement.com/products/care-funding-plans/

    http://advisers.friendslife.co.uk/products/lifetime-care/

    https://www.partnership.co.uk/paying-care-fees/immediate-care-plan/

    You will see that the material is aimed at IFAs. http://societyoflaterlifeadvisers.co.uk/

    Does your mother qualify for attendance allowance?

    Have you worked out how much of the fees can be financed by her state/private pensions?
  • le_louple_loup Forumite
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    The break-even costs of an immediate care annuity will be something in the region of 3-6 years. Obviously dependent upon the health of the person.
    As xylophone says, the payment does not have to be the entire cost of the care home but could be less any pension and attendance allowance.
  • kidmugsykidmugsy Forumite
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    There are only three companies because they are selling what is effectively an insurance policy (against exhausting your capital) and people are irrational about insurance. They buy policies that make no sense, and refuse to buy policies that are perfectly sensible.

    Or, on this subject, perhaps they are being perfectly sensible but nasty, leaving the old folk to freeload on the taxpayers in hopes of getting a bigger inheritance.
    Free the dunston one next time too.
  • SWALLOWSWALLOW Forumite
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    KIDMUGSY "Or, on this subject, perhaps they are being perfectly sensible but nasty, leaving the old folk to freeload on the taxpayers in hopes of getting a bigger inheritance."

    I would assume that those 'old folk' were also tax payers at one time so I do not see how they are freeloading.

    Jackson M. I read about these people today my be worth a conversation https://www.healthtalk.org.

    Also it may be worth speaking to a couple more Financial Advisors to see what they say.

    Good luck.
  • MojisolaMojisola Forumite
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    JacksonM wrote: »
    Hi, this is my first post here and it's about my 85 year old mother. She has just gone into a care home and the fees are unbelievable.

    She is over the threshold for local authority funding and will soon get through her life savings.

    he advised that if she buys an annuity with some of her savings (just over 150K) then she won't have to worry about fees ever again and it would mean that she should still have some capital in the bank.

    If she has £150k plus capital left over, buying an annuity is quite a gamble.

    Your mother will have any pensions plus high rate Attendance Allowance to put towards the home fees so she will only need to draw on her capital from the difference.

    Do the sums and see how long her capital will last.

    It's a sad thought but the average stay in a care home is about two years. Some residents live much longer but most only go in because of health problems and a general deterioration in their health.
  • kidmugsykidmugsy Forumite
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    SWALLOW wrote: »
    I would assume that those 'old folk' were also tax payers at one time so I do not see how they are freeloading.

    Then think harder.
    Free the dunston one next time too.
  • LintonLinton Forumite
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    Mojisola wrote: »
    If she has £150k plus capital left over, buying an annuity is quite a gamble.

    Your mother will have any pensions plus high rate Attendance Allowance to put towards the home fees so she will only need to draw on her capital from the difference.

    Do the sums and see how long her capital will last.

    It's a sad thought but the average stay in a care home is about two years. Some residents live much longer but most only go in because of health problems and a general deterioration in their health.

    To whom is it a gamble? Not to Mum as it guarantees payment of care home fees even if she lives many more years and avoids a danger that she may have to go somewhere cheaper when she is unable to cope with any change. Perhaps to her beneficiaries. But even to them it may guarantee some money remains if not all of it is needed for the annuity.

    Surely this situation is one where Mum's peace of mind and the peace of mind of those to whom she is important takes precedence.
  • SystemSystem Forumite
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    I don't really see the essential difference between running the capital down and then qualifying for funding, or buying the annuity.
    Buying an annuity would be like paying up front for all her care costs for the rest of her life. But with an annuity you are guaranteed to lose it all, self-funding there might be some left over.
  • greenglidegreenglide Forumite
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    and then qualifying for funding
    But do we know, with any certainty, what the level of state funding would be when the cash ran out? The state may not fund the level of care which she expects / needs? If she has not been assessed by social services as needing care by their rules and been assessed as having too much capital to qualify for any funding would there be any certainty what would happen?

    Has the OP actually been quoted for an annuity by an insurance company? Presumably they would want medical evidence?

    Does the immediate needs annuity pay unlimited care costs? Is it index linked? Limited number of care home providers?

    What happens when their price goes up?
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