Immediate Annuity for Care Home Costs

TheGoldfish

My 80 year old mother is starting to realise that living at home is a struggle as she has mobility problems, uses a walking frame and is at serious risk of falling.

I did mention a care home which at first she was completely against but the last few days she has started to ask questions about the possibility. I do want the best for my mum and have found a purpose built home near me costing £1100 a week (c. £57000 p.a.). She has about £130,000 in cash and an owned house worth £350,000 to £400,000 as the house is in a sought after area but does need work to modernise. Worst case scenario I hope would be £480,000 is assets

She has about £10,000 income from pensions and lower level attendance allowance p.a.

I have 2 questions :-

1) Is an immediate annuity a good idea to finance costs.

2) Are assets of at least £480,000 and income of £10,000 a viable source to pay the care home costs via an immediate annuity.

I have seen an article stating investment would be £70,000 per £10,000 needed annual income for an 80 year old although I guess the South East of England could be more expensive.

And can I make it quite clear I will not be forcing my mother into anything she is not happy to do. It will be her decision. Thank you

xylophone

This could be worth consideration as your mother could be in care for another fifteen years or so - my relative's relative died at the age of 97 despite having had heart and mobility problems since her late seventies.

My relative's relative lived alone until the age of 91 but then had six years in retirement home/care home/nursing home - fees increased annually and she ended up paying around £65,000 + a year.

I think that there are now only a couple of providers of these annuities (Aviva and Just) and they can only be accessed through a financial adviser.

https://adviserbook.co.uk/ You tick "confirmed independent" and "long term care" when the menu comes up.

If your mother requires day and night care, she can apply for the higher rate of Attendance Allowance.

https://www.payingforcare.org/buy-a-care-annuity/

bostonerimus

Paying for elder care is a continual worry for many people and it can be a massive cost that is often neglected as the UK really has pretty poor options since the NHS and local authorities stopped providing care for those that needed it. Using your figures your Mum's 480k pot should buy almost a 70k lifetime annuity, but you should discuss this with your mum and decide on the best combo of annuity and savings drawdown.

Just as an FYI this is a big issue in the US and some states are levying a payroll tax so that everyone has access to longterm care and MA has increased the threshold levels where people qualify of state funded care so that fewer middle income people are hit with enormous costs. There is also the option of long term care insurance that can be quite reasonably priced if it is bought in your 30s or 40s. With people living longer the UK really needs to do more in this area.

lisyloo

An annuity will pay the fees until she dies so it takes away the risk of running out of money if she lives a long time.

I would say she has enough but of course you will need to get professional advice. Be aware that even if you build in an increase into the annuity, fee increases could exceed that increase so a top-up annuity could be needed in future.

One question to ask the home is can they cope with end of life care i.e. can she stay in the one place without having to move if/when her needs increase. Hospitals are not a tranquil environment to be.
My MIL is coming up to end of life care and we feel it’s in her best interests to be in the Home if she goes the usual pneumonia route.

I looked into an annuity recently and did not take it for the following reasons.
1) my MIL was in decline and not expected to live a long time. She is currently in calorie deficit and less than 7 stone so can not recover from any infections.
2) her means were more modest and she could not afford top-ups so the annuity did not give up the guarantee we were seeking

Your situation is different but I put that experience up to highlight some issues in particular the potential need for top ups over time and whether end of life care can be provided Within the same establishment,

lisyloo

Forgot to mention get a lasting power of attorney in place (if not already) if she is agreeable whilst she has mental capacity.
My MIL was not agreeable so I had to go Court of protection which is expensive, arduous and slow.

xylophone

get a lasting power of attorney in place

Absolutely - relative's relative had done this many years before she needed to leave her own home - it made dealing with her affairs so much easier when she was alive and (because relative is also executor of her will) even after her death.

LHW99

For immediate care needs annuities you could look at SOLLA for an adviser:
https://societyoflaterlifeadvisers.co.uk/
Not sure if these would all be independent or not, so you may need to check adviserbook as well.

Albermarle

and decide on the best combo of annuity and savings drawdown

I would tend to agree that a combination of the two rather than all or nothing .
Also your Mum will probably be reluctant to potentially not leave any inheritance to her family by putting it all into an annuity .

LHW99

Also, if she is getting to the stage where she would be better off in full time care, she may well qualify for the higher rate of attendance allowance, which is not means tested, and will reduce the amuont needed from savings / annuity by a similar amount. Worth checking with social services, or the home if the decision actually gets made.

jaybeetoo

An annuity isn’t guaranteed to keep pace with care home fees for the rest of her life. From my experience, care homes increase their fees above the rate of inflation.

xylophone

https://www.abi.org.uk/products-and-issues/choosing-the-right-insurance/long-term-care/immediate-needs-annuities/

It might be possible to arrange a degree of index linking.