Care home fee annuity versus pension annuity?

Organista

Talking to someone who is thinking of buying a care home fee annuity for an elderly relative using the proceeds from the sale of his previous residence, I am left puzzled as to the difference between a care home fee annuity and any other annuity such as that from a pension.  Why are there apparently only 4 providers of care home fee annuities whereas there are lots for pension annuities. 

Thanks for any explanation. 

MetaPhysical

I have also wondered exactly the same.  Social care costs are one of the most ruinous of expenses so why isn't there more of a financial industry to save up and provide for it?

Marcon

Organista said:

Talking to someone who is thinking of buying a care home fee annuity for an elderly relative using the proceeds from the sale of his previous residence, I am left puzzled as to the difference between a care home fee annuity and any other annuity such as that from a pension.  Why are there apparently only 4 providers of care home fee annuities whereas there are lots for pension annuities. 

Thanks for any explanation. 

They're different products and potential annuity providers have different appetites/capacity for each.

YBR

I'm guessing

Does the "Care Home Fee" annuity cover care home fees, whatever they rise by?

A pension would only rise by the chosen measure of inflation.

Organista

YBR said:

I'm guessing

Does the "Care Home Fee" annuity cover care home fees, whatever they rise by?

A pension would only rise by the chosen measure of inflation.

Nope.  Options from the prodiers are things like indexed by RPI, RPI+2%, or no indexing.

Organista

Marcon said:

Organista said:

Talking to someone who is thinking of buying a care home fee annuity for an elderly relative using the proceeds from the sale of his previous residence, I am left puzzled as to the difference between a care home fee annuity and any other annuity such as that from a pension.  Why are there apparently only 4 providers of care home fee annuities whereas there are lots for pension annuities. 

Thanks for any explanation. 

They're different products and potential annuity providers have different appetites/capacity for each.

But surely it doesn't matter what the money is for.  All that matters to the provider is how long they will have to pay it for, isn't it?

SVaz

A care fees annuity isn’t taxed but it’s a huge gamble,  if you die after 6 months it’s gone, I’m not sure if there can be guarantee periods. 
A normal annuity, when over and above a State pension, is taxed and when you are talking the amounts needed for care fees,
a proportion would be at 40%. 

More_complicated_than_that

Organista said:

Talking to someone who is thinking of buying a care home fee annuity for an elderly relative using the proceeds from the sale of his previous residence,

SVaz said:

A normal annuity, when over and above a State pension, is taxed and when you are talking the amounts needed for care fees,
a proportion would be at 40%. 

No, that's not right.  When an annuity is purchased out of your own funds (i.e. not from a pension pot), the capital element of the annuity is not taxed.  The rest is taxed as savings income.  What is the capital element and what is the income element is a bit complex (e.g. it will depend on purchase price, age and actuarial tables). 

SVaz

I stand corrected.  I’d missed the bit about it being from non pension funds

wjr4

SVaz said:

A care fees annuity isn’t taxed but it’s a huge gamble,  if you die after 6 months it’s gone, I’m not sure if there can be guarantee periods. 

You can include capital protection. 

westv

Organista said:

Talking to someone who is thinking of buying a care home fee annuity for an elderly relative using the proceeds from the sale of his previous residence, I am left puzzled as to the difference between a care home fee annuity and any other annuity such as that from a pension.  Why are there apparently only 4 providers of care home fee annuities whereas there are lots for pension annuities. 

Thanks for any explanation. 

There aren't lots of providers for  annuities. There are only around 6 or so.