Care Annuity advice

rebecca1

I am planning to wait until early next week to see if he is awarded the Nursing care fund as the hospital discharge co-ordinator and Nursing Home Manager led me to believe.
Then I will ask an IFA to give me a quote for the Care Annuity. He has told me there are only 2 companies that offer it in the UK and that I am not allowed to approach them directly.

I will let you all know the figures (and hopefully wont get told off by the moderator, again for being too open).
I really appreciate all your input which has been helpful to me in this anxious period.

Jamesd
Thanks for your input on the peer to peer lending. To be honest I have always been worried about investing in this myself, so I think it is a gamble to take the risk and responsibility of making a bad investment on behalf of my dad and have all my siblings on my back asking why I lost his money and what would happen to him now? :mad:

Rebecca

Malthusian

rebecca1 wrote: »

Then I will ask an IFA to give me a quote for the Care Annuity. He has told me there are only 2 companies that offer it in the UK and that I am not allowed to approach them directly.

I believe there are no rules against it (could be wrong), but whether there are or not, if immediate needs annuities were offered directly to the general public, there would be a constant stream of complaints every time someone died having recently purchased one, resulting in the insurer getting most of their money (which is more likely than not, as discussed above). And their beneficiaries complained to the Ombudsman / the Daily Mail / their MP that the insurer exploited their dear old ma, or their children's lack of financial expertise.

Hence both the insurers in the market insist on an IFA a) so the annuitant and their family are going into it with eyes open about the high possibility of capital loss b) so the insurer has a shield against any complaint in the form of the IFA.

xylophone

He has told me there are only 2 companies that offer it in the UK

http://www.wearejust.co.uk/products/care-funding-plans/

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

Just Group and Friends Life presumably.

https://ukcareguide.co.uk/immediate-care-annuity/

It’s a good idea to check credentials and qualifications of advisors before making a choice. A Later Life Accredited Adviser who is a member of SOLLA (Society of Later Life Advisers) is always a safe bet – this is someone who has specific experience and expertise in the care funding field. They will know how to help anyone considering buying an annuity and offer the best advice in line with their preferences, requirements and financial situation.

kidmugsy

Malthusian wrote: »

complaints every time someone died having recently purchased one, resulting in the insurer getting most of their money

Dimwits claim that the insurer gets the money when insured people die before their expected age. Who do these donkeys think supplies the cash to those people who die after their expected age?

Malthusian

There are no donkeys as it is entirely hypothetical - the donkeys aren't able to take out an immediate care fees annuity without going through an IFA. Which means there are very few complaints.

However it is a pretty safe bet that if you were allowed to purchase care annuities directly, the families of those who died early (i.e. most of them) would be strongly tempted to try a complaint to recover the tens of thousands of pounds of "their inheritance" that has been lost to the insurer. They would lose nothing if they failed. And "They didn't understand what they were signing" and "They wouldn't have done it if they knew they'd lose money" are arguments which have a very high success rate with the Ombudsman, especially where anyone considered "elderly" is concerned.

Nual

If Dad is eligible for NHS funded nursing care at 156.25 a week, also day and night attendance allowance, plus basic state pension, that is £1554 a month towards the cost.

If the money from the sale of his home runs out the council will pay up to a certain level and the home may request top up fees from ( technically dad) family so that more than likely he will stay there until the end.

If his health deteriorates towards the end ask for a reassessment for Continuing Health Care eligibility, which can be fast tracked if dad is terminal. This will cover the whole cost.

jamesd

Malthusian wrote: »

But not so much that FatherAbraham goes completely through the looking glass and starts suggesting that a 97 year old man for whom return of capital and not return on capital is paramount should be investing in 12% yielding loans on pawned jewellery. ... Which part has FatherAbraham got wrong?

None of the P2P places I would normally suggest and none of those mentioned in the MSE guide has led to any decently diversified lender making a net loss of capital after a year or two of investing. Yet FatherAbraham described it as speculation that could lead to losing more money than expected and to him going to the workhouse, an institution that hasn't existed in this country for many decades.

Malthusian wrote: »

suggesting that a 97 year old man for whom return of capital and not return on capital is paramount

His objective hasn't been specified. It might be spending all possible funds on care to maximise the quality of the care he receives or it might be maximising inheritance or anything in between.

If return of capital is the paramount objective then investing is likely to be required and of the main options for investments it's P2P that's most sure to achieve the capital preservation objective. That's because it has the useful properties of delivering substantial income without the periodic large drops in value that equities suffer from or the guaranteed loss of any capital spent on an annuity purchase.

There's also the potential need to consider inheritance tax capital preservation issues if providing an inheritance is a substantial objective of his.

rebecca1's posts have implied that she is interested in a blend of both preserving capital and obtaining the quality of care she desires for him.

Regrettably her posts have also implied that she's projecting her own risk tolerance onto her responsibility and possibly her legal duty, rather than considering all of the options. If she doesn't like the no loss expected P2P option it seems unlikely that she'll consider equities or bonds with higher potential loss levels, so she may restrict herself to options that guarantee a loss of capital.

Hopefully she'll let us know what annuity quotes she gets and what she chooses to do. My guess is that she'll end up railroaded into the buy an annuity and accept the loss of capital approach.

Malthusian

jamesd wrote: »

None of the P2P places I would normally suggest and none of those mentioned in the MSE guide has led to any decently diversified lender making a net loss of capital after a year or two of investing.

So there's no possibility of capital loss given "decent diversification" and at least two years? They're definitely mispriced if the yield is 12% per annum then.

"Decently diversified" with equities can mean bunging it all into Vanguard LifeStrategy via a single platform (or direct with Vanguard). "Decently diversified" with P2P seems to mean that you must diversify across numerous platforms, and from there diversify each platform holding across numerous underlying loans, at least if you are investing at the 12%pa end you were talking about. The OP's given no signs that she is one of the small percentage of investors (like you) willing to put in that much effort.

His objective hasn't been specified. It might be spending all possible funds on care to maximise the quality of the care he receives or it might be maximising inheritance or anything in between.

The OP said in her first post that she was worried about the possibility of her father running out of money and having to move to a different care home. It follows that an investment where a rise in default rates could lead to substantial capital loss (either because of the defaults themselves, or because the OP needs to sell P2P loans on the secondary market to fund the care fees, which in a crisis is likely to be at an extremely severe discount given the secondary market is tiny compared to mainstream stockmarkets), which would rapidly accelerate the point at which he runs out of money and has to move care home, is unlikely to be suitable.

jamesd

Malthusian wrote: »

So there's no possibility of capital loss given "decent diversification" and at least two years? They're definitely mispriced if the yield is 12% per annum then.

Never no possibility, it's just very unlikely to happen compared to say a stock market drop or the certainty of it from buying an annuity.

No at least two years requirement, but it is possible for someone to invest the money and have a default on the first day before any interest has been received. Two years or a few months is enough to deal with that potential, and I chose to mention two years.

Malthusian wrote: »

"Decently diversified" with equities can mean bunging it all into Vanguard LifeStrategy via a single platform (or direct with Vanguard). "Decently diversified" with P2P seems to mean that you must diversify across numerous platforms, and from there diversify each platform holding across numerous underlying loans, at least if you are investing at the 12%pa end you were talking about. The OP's given no signs that she is one of the small percentage of investors (like you) willing to put in that much effort.

I don't think that there's any Vanguard Lifestrategy offering that would meet a strict capital preservation objective because they all use equities or equities and bonds. Even the lowest risk seems to have the potential for a drop of about 20%.

While the 12% P2P takes some work there are other options, including the ones like Zopa and RateSetter that pay significantly less but where there's minimal ongoing work. We don't know whether they would pay enough to achieve the objective here and at the moment Zopa isn't accepting new customers. RateSetter even has a protection fund that so far has meant no losses at all to lenders.

Malthusian wrote: »

The OP said in her first post that she was worried about the possibility of her father running out of money and having to move to a different care home. It follows that an investment where a rise in default rates could lead to substantial capital loss (either because of the defaults themselves, or because the OP needs to sell P2P loans on the secondary market to fund the care fees, which in a crisis is likely to be at an extremely severe discount given the secondary market is tiny compared to mainstream stockmarkets), which would rapidly accelerate the point at which he runs out of money and has to move care home, is unlikely to be suitable.

Neither a sufficient rise in default rates nor a sufficient need to sell to cause a capital loss is likely compared to something like Vanguard's Lifestrategy range. RateSetter for example offers a rolling market and on other platforms you can just use a mixture of loans with different end dates if some capital spending is going to be needed. At a place like Ablrate someone wanted to sell more than £60,000 of one loan rapidly and did it in a few days with a discount of 4% and less, about a third of a year's interest. I bought about £12,000 of that at a discount of just under 4%.

Like FatherAbraham you're using arguments that just don't fit with how P2P really performs, and you've just suggested an option in the form of Vanguard Lifestrategy that's more likely to lead to a capital loss, both from the potential of a market drop and the potential of not meeting the income need.

Of course maybe if we knew more about current income and needed spending we might find that savings accounts would do the job. Would be nice.

LHW99

If his health deteriorates towards the end ask for a reassessment for Continuing Health Care eligibility, which can be fast tracked if dad is terminal. This will cover the whole cost.

IMO it may be unwise to rely on this happening. My mum suffered a stroke, and at the end could not speak, move and had to be fed via a tube. We could not get her assessed for continuing care, and at that point I was totally unable to cope with the hassle of trying to deal with the system. Thankfully (in a way) it was for a short time and her assets more than covered the cost of the few weeks she had in care after the initial weeks ran out.