Immediate Care Annuity

ABC99

Hello


My father has recently had to go into a care home. My Solicitor advised me that these may be an option to limit how much will need to be paid to secure his care.


They work by paying up front a lump sum, this will then be used to fund his care for the rest of his life.


I cannot approach a provider directly (I have tried) and must go through a Financial Adviser (?).


Has anyone got any experience of these and are they recommended?


My father is 86 and is suffering from early stage dementia.


Thanks

dunstonh

I cannot approach a provider directly (I have tried) and must go through a Financial Adviser (?).

It is a high risk product from a liability point of view (as the risk of children complaining later that the money has all gone is high) and it has limited distribution and the distributors dont want to take on that liability.

Has anyone got any experience of these and are they recommended?

There is no way to tell in advance whether it is going to be the best option or whether investing and drawing an income is going to be best. It all depends on the amount being drawn and how long they live. The annuity has guarantees for care for life but the dependents will get less of the money (if any of it).

jamesd

If you say more about his whole financial circumstances it should be possible to give some idea about whether it is likely to be suitable. VItal information needed includes:

1. Assets like savings, investments and property value as well as whether someone else needs to live in that property or could live in a downsized property.
2. Income from each type of pension he has.
3. Anticipated costs for the home and care and any other obligations like loan repayments or supporting another person that he has.
4. Whether his life expectancy is longer than the usual 1-3 years for those moving into such places and what the impact might be on others if he did live an unexpectedly long time. early stage dementia without indication of speed of progression or treatment implies to me it might be nearer to three years than one year and could be longer.
5. What arrangements are in place for others to control hsi finances and medical treatment decisions, if any.
6. Any potentially relevant will provisions and the potential views of any beneficiaries. While the decision makers must in law ignore these views and act solely in his interests in practice they matter.

The key thing we can do here is review whether and for how long the costs might be sustainable and whether it seems like a good move to use some of his asset value to buy the insurance to cover the potential for a longer than typical life.

PasturesNew

We faced this decision, age was 87, dementia. Reports tell you the average time spent in a care home is 2 years .... with longevity in the family and the patient's ability to go on and on and on and on .... through all sorts of serious illnesses in life meant there was the potential we could be looking at somebody who would just keep plodding on and get to over 100.

We chose not to buy an annuity.

Once in the home their new best friend was 102 ... and the place was well run .... but you make your decision and then have to wait to see if you were "lucky".

Our term of stay was 3.5 years.

At the end of the day, the company's in it to make a profit, not to be there to help you through hard decisions and times. They want to run their yachts and drink champagne.

It comes down to a gamble ... you're gambling on the age of somebody you know ... it's not a good feeling making this decision.

le_loup

I bought one for my MIL. The break even point was around 3.5 years. Six years later she is sill hearty if not hale. The family beat the insurance company on this occasion.
HOWEVER, the reason for buying the annuity was to give certainty. You don't expect your house to burn down but you take out insurance just in case.

xylophone

I cannot approach a provider directly (I have tried) and must go through a Financial Adviser (?).

I believe that there are only three specialist providers, Friends Life, Partnership and Just Retirement.

See here re SOLLA - http://societyoflaterlifeadvisers.co.uk/what-we-do/long-term-care/

An adviser would get a quote from all three.

http://www.ftadviser.com/2015/06/11/pensions/annuities/getting-to-grips-with-immediate-needs-annuities-Kk30eC7jC9jCQTuR1qSJKI/article.html may be worth a read.

The alternative is to assess how much capital your father has, how much income his state/occupational pension will provide and whether he is eligible for Attendance Allowance - if he is, apply as soon as possible if you have not done so already.

Remember that fees increase faster than inflation - someone I know is in a care home and the fees increased by over 3% last year and the same this, meaning that she is now paying over £60,000 a year.

Only around half of this is funded from SP/OP/AA - the rest comes using a mixture of capital and investment income.

In this particular case there was already investment income and the sale of a substantial family home provided capital - the person in question was 91 on entering care and is now rising 94 - best friend in the home has just received the telegram from the Queen and one from Iain Duncan Smith on behalf of the DWP......

And I should say that even at the age of 91, a rough quote for INCA (which would have covered only a proportion of the fees) ran into tens of thousands of pounds....

LHW99

Looked into this for my MIL who had dementia aged 89.
You need an adviser who is a member of SOLLA.
The annuity would have taken about £50000, but wasn't in the end purchased as she sadly passed away.
As le loup says the point is that these give certainty that if things go well the money won't run out, and any capital beyond what is needed can be invested.

kkgree1

We've just purchased an annuity for my MIL who is in residential care. We've been very happy with the service received from the intermediary who I would be happy to recommend via PM. They did a full financial assessment for her to help us decide whether it was worthwhile.
As others have said, there are only three providers. In my MIL's case Friends Life were much cheaper than the other two (by around 30 - 40k!).
It is all about risk at the end of the day and only you can decide this. We are now very happy with the certainty of meeting her care costs going forward.

ABC99

Thank you all for taking the time to reply.


kkgree1-I have sent you a PM.