Care home annuities

Nickvale

Hi - 
My mum's 95, got dementia and has been in a care home for some years now. She's self-funding but at over £2000 per week she's getting through her savings very quickly. She's physically in pretty good shape so the family is a bit concerned she'll outlive her savings.
We've heard that you can buy Care home annuities, which for a lump sum, would pay the care home fees for the rest of her life. Looking on-line for details seems a bit of a minefield though, with a lot of providers and brokers giving differing 'estimates' of the potential one-off cost. Some seem to require fees for looking for the best deals as well, and there doesn't seem to be any sort of regulated market. As there's a lot of cash at stake (six-figure sums) I was wondering if anyone out there has looked into Care home annuities and if so do they have recommendations as to the best and safest way to compare providers?
Many thanks - Nick 

Marcon

Nickvale said:

Hi - 
My mum's 95, got dementia and has been in a care home for some years now. She's self-funding but at over £2000 per week she's getting through her savings very quickly. She's physically in pretty good shape so the family is a bit concerned she'll outlive her savings.
We've heard that you can buy Care home annuities, which for a lump sum, would pay the care home fees for the rest of her life. Looking on-line for details seems a bit of a minefield though, with a lot of providers and brokers giving differing 'estimates' of the potential one-off cost. Some seem to require fees for looking for the best deals as well, and there doesn't seem to be any sort of regulated market. As there's a lot of cash at stake (six-figure sums) I was wondering if anyone out there has looked into Care home annuities and if so do they have recommendations as to the best and safest way to compare providers?
Many thanks - Nick 

Have you spoken to the home to see if they have any thoughts? Your mum probably isn't going to be the first resident where this has cropped up.

squirrelpie

You're looking for an "immediate needs annuity". There's a description at https://www.moneyhelper.org.uk/en/family-and-care/long-term-care/immediate-needs-annuity  IIRC there are only four or so providers. There are several threads on this forum about the subject.

LHW99

This organisation provides contact with IFA's that specialise in helping older people https://societyoflaterlifeadvisers.co.uk/

You can search on the site for adviser details, but make sure you are speaking to an independent adviser.

Ibrahim5

Age 95 with brain failure. How long do you really think she is going to live? If you want to play statistics with an insurance company they will play. An IFA will play as long as he can take a big fat fee. They will take years of contributions. Who do you think will win. I put my money on the insurance company. You will lose big time.

LHW99

OP - an IFA provides a service, and just like the gas service engineer or the plumber they charge for their time.

While most people here are thinking of their own pension, where if you are willing and able to DIY you don't have to pay an adviser, for the type of annuity you are considering you need to go to one, because that's the only way to get one.

They do cost money, we considered one for my MiL, who was a little younger but with similar health problems. In the end we didn't need it sadly. However, if her physical health is reasonably good, an immediate care needs annuity is an insurance against running out of money - like house insurance you pay, and maybe the house didn't burn down so you would have been all right without. But in the case that it did, you're thankful you had the insurance.

Talk to the home and get their opinion, and consider at least an initial meeting with one or more advisers to get a feel for the process if you feel it may be worth considering.

Ibrahim5

The IFA is only interested in his big fat fee.
The annuity provider only wants to make sure that they pay out much less than you give them. The average care home stay is about 2 years. How long has she been there already?

LHW99

Ibrahim5 said:

The IFA is only interested in his big fat fee.
The annuity provider only wants to make sure that they pay out much less than you give them. The average care home stay is about 2 years. How long has she been there already?

Any IFA is justified a fee for their work. If you need one you have to be prepared to pay - in this case, the OP will need one.

The annuity provider takes on the risk that the stay is longer than the average, so that the purchaser doesn't have to.

While the average stay is 2 years, that means 50% would be staying longer than that. A friend's relative spent 8 years in a dementia home.

As said, an immediate care needs annuity is a form of insurance. No one compels you buy insurance, but if you don't have it and the worst happens, you have no come back. You have to make a judgement.

It is no help to the OP if you keep incorrectly trying to imply all IFAs are crooks Ibrahim5.

GDB2222

Nickvale said:

Hi - 
My mum's 95, got dementia and has been in a care home for some years now. She's self-funding but at over £2000 per week she's getting through her savings very quickly. She's physically in pretty good shape so the family is a bit concerned she'll outlive her savings.
We've heard that you can buy Care home annuities, which for a lump sum, would pay the care home fees for the rest of her life. Looking on-line for details seems a bit of a minefield though, with a lot of providers and brokers giving differing 'estimates' of the potential one-off cost. Some seem to require fees for looking for the best deals as well, and there doesn't seem to be any sort of regulated market. As there's a lot of cash at stake (six-figure sums) I was wondering if anyone out there has looked into Care home annuities and if so do they have recommendations as to the best and safest way to compare providers?
Many thanks - Nick 

So, care home fees are £100k pa.  Supposing mum’s life expectancy is 3 years, the insurance company is going to want a bit more than £300k as a lump sum cost, as they have to allow for all their expenses. 

Of course, mum might live longer than 3 years, in which case the insurance company will continue paying out £100k a year, which is funded by those other mums who die more quickly than expected.

The annuity will not reduce the expected cost, but it takes away some of the worry that mum may live longer than average for her age and state of health.   

The care home fees will probably increase in future, and the annuity will only cover whatever increases are built into the contract and which you pay for when you take it out.  

There is a life expectancy calculator here
https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandlifeexpectancies/articles/lifeexpectancycalculator/2019-06-07

Marcon

LHW99 said:

Ibrahim5 said:

The IFA is only interested in his big fat fee.
The annuity provider only wants to make sure that they pay out much less than you give them. The average care home stay is about 2 years. How long has she been there already?

Any IFA is justified a fee for their work. If you need one you have to be prepared to pay - in this case, the OP will need one.

The annuity provider takes on the risk that the stay is longer than the average, so that the purchaser doesn't have to.

While the average stay is 2 years, that means 50% would be staying longer than that. A friend's relative spent 8 years in a dementia home.

As said, an immediate care needs annuity is a form of insurance. No one compels you buy insurance, but if you don't have it and the worst happens, you have no come back. You have to make a judgement.

It is no help to the OP if you keep incorrectly trying to imply all IFAs are crooks Ibrahim5.

You can change your settings to 'ignore' where you don't think someone's posts are worth wasting time on - which I how I avoid seeing the constant drip of anti-IFA poison from this silly person. I've only seen it now because you quoted it!

wjr4

Not all IFAs can advise on this so you need to make sure they have the correct qualification.