Immediate care needs annuity

LHW99

I am clearly moving towards accepting the loss in return for the guarantee.

We did not get to the point with my MIL, as she sadly passed less than a year after entering care. However we were actively looking to take out an ICA for that very reason.

GunJack

Really interesting thread..has generated a couple of questions if I may?

1. What kind of cost to income are these annuities coming in around (roughly, not expecting anyone's real numbers)

2. You mention using 50% of the property sale for the annuity - if self-funding does this mean the annuity money is topped-up as needed with the other 50% until it's depleted to the max savings lump of £20-odd k?

kkgree1

I think this is almost impossible to say as they're based on age, health and individual circumstances. We were told it can range from 20 - 150k depending on how much of the fees you want to cover.

Any outstanding care fees are topped up from remaining capital until they reach the savings allowance of circa £23k.

For example, my MIL's annuity covers 52% of her monthly care home fees and the rest is covered by income (DLA, pension, etc) and a small amount of capital.

fred246

lisyloo wrote: »

She can walk but needs assistance of 2 carers. She has dimensia and is 91. She has been quite well in the home although is quite frail and thin.

lisyloo wrote: »

but physically/clinically she’s fine

I am not sure that needing assistance of 2 carers to walk is 'physically fine'. I think you just want everyone to tell you buying an annuity is a good idea and if you keep asking people will tell you it is. Have you been quoted a premium? Sorry if I missed that bit.

Shedman

GunJack wrote: »

Really interesting thread..has generated a couple of questions if I may?

1. What kind of cost to income are these annuities coming in around (roughly, not expecting anyone's real numbers)

2. You mention using 50% of the property sale for the annuity - if self-funding does this mean the annuity money is topped-up as needed with the other 50% until it's depleted to the max savings lump of £20-odd k?

Premiums obviously depend on age, health, whether indexation and/or deferral is taken, etc but for £17k p.a on an 86 year old were

Indexed (5% p.a) immediate start £115k, 1 year deferred start £95k, 2 year deferred start £80k

Level (non indexed) immediate start £95k, 1 year deferred £75k, 2 year deferred £60k.

There's some indicative figures at different ages on this website (and some useful info) on this page http://www.sharingpensions.co.uk/ad-guide-immediate-care-annuity.htm?google (by the way that is not an endorsement of that site, just happened to be one that I came across when I was looking for indicative figures.)

Clearly the level options are 'better' (less loss) if recipient dies earlier than forecast due to lower initial outlays but on an assumption of say 3% p.a. care home increases the indexed ones are not significantly worse after 3-4 years and breakeven point is only about 1 year different. If care home costs escalate higher than 3% (quite likely given the high degree of correlation to labour costs) then the indexed version improves.

As with kkgree1 the annuity is covering about 50% of care home costs as MiL has pensions (occupational and state) and full AA plus interest from the reminder of the capital that's on deposit.

With regard to if the self funding element ran capital down to below the £23k then my understanding is that there would likely not be LA top up as the annuity along with pensions etc would likely be above the LA income threshold (as they take persons income into account as well as capital). Clearly that would depend on total income level when means tested.

Spreadsheetman

lisyloo wrote: »

It possible but I feel unlikely.
Cognitively she’s declining, but physically/clinically she’s fine.
Yes that could change but I’ve heard there is a strong resistance to paying CHC.

Yes, it is very hard to get full CHC. I have direct recent experience with my father - he was very ill, but because it could be (just) managed in the nursing part of a care home with NHS-funded nursing assistance, he didn't qualify. (and it wasn't a close thing either)

lisyloo

GunJack wrote: »

Really interesting thread..has generated a couple of questions if I may?

1. What kind of cost to income are these annuities coming in around (roughly, not expecting anyone's real numbers)

2. You mention using 50% of the property sale for the annuity - if self-funding does this mean the annuity money is topped-up as needed with the other 50% until it's depleted to the max savings lump of £20-odd k?

I’ve been told 3 years costs for 91 year old (before quoting).

Why top up? I’d intend to set up the annuity to cover the costs (minus income) and allow for an annual increase. There is always the possibility that fees increase beyond expectations but should be relatively small, but the intention would be not to need to top up.

She’s already in nursing and they take people to the end so we don’t foresee a need to move her.

lisyloo

fred246 wrote: »

I am not sure that needing assistance of 2 carers to walk is 'physically fine'. I think you just want everyone to tell you buying an annuity is a good idea and if you keep asking people will tell you it is. Have you been quoted a premium? Sorry if I missed that bit.

From the point of view of longevity arthritis will not kill her. From a longevity point of view she’s a tough old bird with an older sister.

Usually if you ask on here you get angles you hadn’t thought of which is exactly the kind of critical advice I want. Not looking for agreement.

Been given a ballpark of 3 years which sounds good to me. Not got to formal quotes yet mainly because we’ve only recently exchanged so the sale has so far been my priority, before that COP, before that house clearance.

Did you have anything useful to add even if critical?

Her going into overmydeadbodygrove is totally unacceptable to us and a nightmare scenario for her and us.
We won 2 cases with the LA but had bed blocking fines on our side adding pressure. No guarantees if what will happen in 5 years.

Happy to have your criticism if it’s valid, but arthritis doesn’t kill people.

What’s your reason for being strongly against?

GDB2222

I don't think you should expect to out-smart the insurance company. They do this for a living and have all the stats. Overall, they have to meet their expenses, pay the annuities, AND make a profit from the money they take in. So, you should expect to get back less than you pay the insurers.

As to the lady being physically pretty fit and having long-lived relatives, the insurers will have the same information and will price the annuity accordingly.

It seems that you are going into this for exactly the right reason, ie insuring the risk that the lady will live longer than you can afford to pay the nursing home fees out of capital.

Shedman

lisyloo wrote: »

I’ve been told 3 years costs for 91 year old (before quoting.

If that estimate firms up to a similar priced quote then that is very good (presumably that's based on a level annuity). I would expected breakeven on a 91 yo to be closer to 4 years as most of the life expectancy tables indicate 95 years for a female currently that age.

With regard to your response to fred246 I can kind of see that severe arthritis could be life limiting in that it can lead to falls, which often seems to be the precursor to rapid decline and death in very elderly, but, as with my MiL, I think being in a home rather than struggling to live independently they are probably at reduced danger of falls so that mitigates one risk factor.

Presumably your IFA is getting you quotes with no upfront fee and no commitment? In which case it really is a no brainer to at least get quotes in this situation so the information is available to make a balanced judgement. I'm surprised that more people don't look into this but I guess it's not a well known way of financing care home costs (I think I read somewhere there's only about 5,000 policies currently in force ..so it's easy to see why there are only 2 companies left, although our advisors indicated back in Oct that a third was supposed to be entering the market soon)