Investment of Care home savings

Rodders2409

Hello All,

We have recently needed to move my 86 year old mother in law to a dementia care home, and subsequently had to sell her home. The good news is that the home is really nice and she's settled in very well and I'd say quite happy.

The frightening element are the fees, which I now know to be fairly standard, and will probably last about 6 years before needing to make other decisions.

The property sale is close to completions and will raise £250K, with £42K needed per annum to cover the care home. Her £8K yearly pension will also be used to cover care home costs.

I am looking to set up various homes for the monies, such that we can at least try and cover inflationary rises in care costs if possible. Given that there's only about 6 years to cover (?), can anyone suggest possible options...fully appreciate that there are slim pickings in terms of interest rates etc...

Many thanks

pip895

Do you know what will happen when those funds run out? Will the LA step in or would she have to be moved? Also how quickly has her condition been detreating?

The answer to those questions might determine the amount of risk I would be prepared to take with the investment..

Rodders2409

Hello Pip,

Good questions and something we've struggled with for the past 4 months. You try not to be clinical about it but there's always the cold light of day to face up to.

We've taken the view, helped through a friends experiences, that whilst she is early'ish stage dementia , she should be in a quality place with a good level of extra activities that she can be happy doing.

If she reaches 92-93 then she'd probably be in a more withdrawn state and dementia would have a strong hold, so not to be cold about it, she probably won't know whats going on and the Local Authorities would need to step in and accommodate her.

We've seen a couple of local LA homes and they're OK, but not good.

Albermarle

The standard advice is that any money needed within 5 years should be kept in a safe savings account , even if it means you will be losing out to inflation due to low interest rates .
On a 10 year + timescale then investments in risk based financial products is the way to go, as the longer time scale should iron out the volatility of these markets.
Between 5 and 10 years , it depends on personal circumstances /attitude to money /risk .
Maybe on this timescale a mixed approach would be suitable.

fwor

When we were in a similar position last year, we took the recommendations from this forum to set up a savings bond "ladder".

With this, you calculate the annual funding needs (care home costs, plus personal costs, minus pension income, minus any care allowances) and place that much in a no-notice savings account to be used during the first year. You then place one year's worth in a one-year fixed term savings bond, another year's worth in a two-year fixed term savings bond, and so on. The remainder then goes in the final savings bond - in our case we only went up to 3 years, as the 3-year rate was quite attractive at the time.

This means that you can review actual versus budget at the end of each year and (hopefully) allocate any unused amount to another year's long-term bond.

This is reasonably good, guaranteed way to get the most interest without having to use investments where the return was unknown and involved an element of risk.

Rodders2409

Thanks Alber and Fwor,

Yes, the staggered ladder approach is what we have been looking at, and I guess its not rocket science with some products allowing one withdrawal within a period without penalty which may help.

Notepad_Phil

Immediate needs annuities might be of some use depending on her health, they are tax-free if paid directly to the care home but are only suitable for a limited number of people.

https://www.moneyadviceservice.org.uk/en/articles/immediate-needs-annuity links to https://ukcareguide.co.uk/immediate-care-annuity/ which gives a potential £10,000 annuity for a cost of £55,000 for an 85 year old - figures based on annuity rates in February 2019. Unfortunately it does not give details of the health of that 85 year old so your Mother-in-Law might get more or less than that.

xylophone

Have you applied for Attendance Allowance?

Have you checked whether the Nursing Care Component is available to her?

https://www.nhs.uk/conditions/social-care-and-support-guide/money-work-and-benefits/nhs-funded-nursing-care/

pip895

If you want a simple option - Hargreaves Lansdown's active savings are worth a look. I have just set up an annual savings ladder in there at rates between 1.2% instant access through the Coventry BS through to 1.9% at 3 years with Aldermore. It is incredibly straightforward and you could also add in a S&S Isa in the same account to take the longer term money if you thought that a good option..

Shedman

Presumably you have Power of Attorney? Unfortunately you will find that there are a limited number of bank accounts, especially those paying a decent rate of interest (whatever that means these days!) and most of the online only banks, that allow you open them using POA. It's very frustrating especially as you need several to keep within the £85k protection for each bank.

We are in a similar position with wife's mother and sold her house in mid 2018. We did a range of 1yr fixes (at around 2.15%), notice account accounts (@1.85%j and an easy access account (@1.56%) so averaged around 2.0%. This year a number of those banks stopped allowing POA accounts and all of the rates reduced such that we were even more restricted as to which banks to use so it now only averages 1.75%!. I would give you some suggestions but unfortunately even most of the ones we used in August are now not either accepting POA applications or only have offers open to existing customers.

It's a very poor situation and although I personally don't have an issue with people having to use their assets to pay for care I really think the government should offer some form of tax free bond paying at least CPI rate for those that have to fund their own care home fees, especially having had to sell their house, given that they are in a number of cases effectively subsidising those being paid for by LA in same homes.

I would also second looking into an Immediate Care Annuity if you think or worry that life expectancy might exceed the runout of the available funds (especially given care home costs seem to rise at 5%+ p.a.) and don't want her to have to go into an LA home. We took one out for MiL on basis that even if we 'lost' (i.e. she died before we recovered the premium outlay) at least we have the comfort that that the care home fees could be met without the family having to contribute should she live longer than the 6 years or so her funds would have lasted. PM me if you want details of the advisor we used (but do look for a SOLLA accredited advisor), how it works / options available/ ideas of costs etc.

With regard to using investment (eg shares) accounts you will have to take account that with a POA your obligation is to manage things for the benefit of the Donor and that if investment is not something they would have usually contemplated then it may be something that shouldn't be considered.

Rodders2409

Many thanks for all the input, I'll digest this in a couple of days we have family down at the moment.
I'd not considered an annuity before, so this is interesting too.

Again, thanks....and have a good new year!!