Care Fees Annuity - Advisers Commission?

Shylock

I'm using a SOLLA & LLAA Accredited advisor to obtain quotes for a Care Fees Annuity for a relative.  The advisor works Free of Charge and adds a commission to the eventual cost of the annuity if my relative decides to go ahead and purchase.  Estimates put the likely cost of the annuity circa £350k .  What percentage commission would such an advisor be expected to charge?  What would be an equivalent Financial Advisors commission for a Pension Annuity of similar value?

dunstonh

The commission is not allowed.  The adviser would need to operate on fee basis with the product arranged on a nil commission basis.
Broadly speaking, if the commission was £3000 for non-advised and £3,000 fee for advised, the outcome would be the same.

The advisor works Free of Charge and adds a commission to the eventual cost of the annuity if my relative decides to go ahead and purchase.  

Are you sure its an adviser in the regulatory sense?   Advisers are not allowed to take a commission.  Non-advised guidance or admin staff can.    And the commission is not free of charge.    The annuity rate is reduced to cater for the cost of the commission.      

What would be an equivalent Financial Advisors commission for a Pension Annuity of similar value?

A fee would probably be around £2500-£5000.  However, it would largely depend on the type of firm you approached.

fred246

The advisor would have to fill a form out so £5000 would be a reasonable fee? £350k is probably about 7 years care? The average stay in a care home is about 2 years. I think the only people to buy these annuities are those unrealistic about likely length of care home stays. Nobody can guarantee how long they will live for but the annuity provider is much more likely to win the bet. We were in a similar position. They ended up living for 12 months.

fred246

We got an advisor from St James Place via SOLLA. He said an annuity would cost about 7-8 years of care home costs. I said that's a bit much if the average stay is 2 years. He didn't stay long and I never saw him again. If I had said I was worried they would live 20 years I am sure he would have kept calling.

LHW99

fred246 said:

£350k is probably about 7 years care? The average stay in a care home is about 2 years. I think the only people to buy these annuities are those unrealistic about likely length of care home stays. Nobody can guarantee how long they will live for but the annuity provider is much more likely to win the bet. We were in a similar position. They ended up living for 12 months.

Whilst that is true, these annuities do make sure most of the fees will be covered for as long as.

That peace of mind can be worth a great deal. A relative of an acquaintance had care for over 8 years, so it does happen.

barnstar2077

fred246 said:

We got an advisor from St James Place via SOLLA. He said an annuity would cost about 7-8 years of care home costs. I said that's a bit much if the average stay is 2 years. He didn't stay long and I never saw him again. If I had said I was worried they would live 20 years I am sure he would have kept calling.

Have you checked the silverware since he was round?  :  )

Albermarle

There seems to be a generally  unrealistic fear about care home fees taking all someone's money/house/inheritance , probably stoked up by the usual fearmongers in the popular press.
Is it possible that you could lose almost everything to care home fees ?- Yes , especially someone with early onset dementia .
Is it likely that you could lose almost everything to care home fees - NO 
Most older people never go into a care home, and as fred246 points out , those that do normally only last a couple of years on average .
Like all insurance type products there is something of a gamble involved, but in this case  the odds seem to be against paying our such a huge sum .

Linton

Like all insurance you will make a loss if you dont need it.  But with enough assets you can always "self insure".  So the question for people having to make these difficult decisions for an aged relative is "what is the strategy if the relative does live too long?".  You really need to have thought through the implications before making a decison on a care fees annuity.

badmemory

I think the problem (as in living a long time) is when the care home resident does NOT have dementia.  Dementia will kill sooner rather than later & the really awful bit is that they will not know whether they are in the cheapo place or the all singing & dancing bar on the premises place.  If I was trying to decide about this insurance then I would say dementia, forget it, but losing ability to do things for yourself but still 100% with it, then get the insurance.  After all, if you have heart problems then your biggest stressor is likely to be if you get to the loo in time, so it could actually increase your life expectancy, especially if you have plenty of visitors.

fred246

The numbers of people going into care homes has decreased massively in recent years. It's all down to more care being provided in the community. Basically armies of carers on minimum wage going from house to house making multiple visits a day. Most people with physical problems can be kept at home. If your heart was so bad you couldn't live at home with carers you aren't going to live long.

fred246

There was someone on the forum who kept saying they had a relative with dimensia who was physically well and would live forever. You could tell they hadn't googled the implications of dementia because they kept getting the spelling wrong. I guess it's a case of contingent charging. The adviser only gets paid if you take out an annuity. So the adviser will say "they could live forever. With our product you have no worries". To cover themselves they make it clear that the premium is not refundable because some people will die within a few weeks of being admitted. I always thought an annuity would be stacked in their favour but I hadn't really realised how much it was. There must be very few people who gain by buying an annuity.