Immediate Needs Annuity

DairyQueen

I believe that an immediate needs annuity can be purchased using a DC pension, and that the income is paid directly to the care provider. It is therefore free of income tax. Is this correct?

Is it possible to purchase such an annuity from an individual's pension pot in order to meet a spouse's care costs? Or must the annuity pay only for the pension holder's care?

TIA

xylophone

https://www.gov.uk/hmrc-internal-manuals/insurance-policyholder-taxation-manual/iptm6205

https://www.immediate-needs-annuity.co.uk/about/ina-providers/#:~:text=Legal and General have been,since the start of 2021.

Worth an enquiry?

GDB2222

The annuity needs to be purchased with your own cash. If you have money tied up in a DC pension fund, you can withdraw cash subject to the usual rules. 

Once you have the cash you can use it to buy an annuity for your spouse, and the proceeds will be tax free if paid directly to the care provider.

LHW99

GDB2222 said:

The annuity needs to be purchased with your own cash. If you have money tied up in a DC pension fund, you can withdraw cash subject to the usual rules. 

Once you have the cash you can use it to buy an annuity for your spouse, and the proceeds will be tax free if paid directly to the care provider.

While possible to do, I am not sure why you would need to.

a) Care is assessed on the funds of the person needing it.

b) Money that belongs to a spouse would not be included and nor is the house if a spouse (or certain categories of dependents, I think) are living in it.

c) Once the person needing care's funds drop below ~£23,000 the LA should step in to pick up the cost.

d) If you do that, what happens if you also end up needing care?

Have you taken advice from a suitable IFA, as care needs annuities are only offered by a few companies, and they work with advisers?

Try SOLLA:

https://societyoflaterlifeadvisers.co.uk/

DairyQueen

LHW99 said:

GDB2222 said:

The annuity needs to be purchased with your own cash. If you have money tied up in a DC pension fund, you can withdraw cash subject to the usual rules. 

Once you have the cash you can use it to buy an annuity for your spouse, and the proceeds will be tax free if paid directly to the care provider.

While possible to do, I am not sure why you would need to.

a) Care is assessed on the funds of the person needing it.

b) Money that belongs to a spouse would not be included and nor is the house if a spouse (or certain categories of dependents, I think) are living in it.

c) Once the person needing care's funds drop below ~£23,000 the LA should step in to pick up the cost.

d) If you do that, what happens if you also end up needing care?

Have you taken advice from a suitable IFA, as care needs annuities are only offered by a few companies, and they work with advisers?

Try SOLLA:

https://societyoflaterlifeadvisers.co.uk/

We don't want to be at the mercy of the LA. Would rather be self-funding whilst possible.

We are in the 'unfortunate' position that OH's DC cash is trapped in his SIPP courtesy of frozen tax allowances. We are not minded to drawdown at 40% tax. It would therefore be super tax-efficient if we could purchase an immediate needs annuity (when/if required) directly from that SIPP. 

After further research I have established that such an annuity could be purchased for OH's care directly from his SIPP without drawing down. There would be no income tax to pay. I don't think that his SIPP could purchase care for me though so we would have the house as a fall-back if both of us needed care.

Thanks for the answers.

fuzzybl

DairyQueen said:

LHW99 said:

GDB2222 said:

The annuity needs to be purchased with your own cash. If you have money tied up in a DC pension fund, you can withdraw cash subject to the usual rules. 

Once you have the cash you can use it to buy an annuity for your spouse, and the proceeds will be tax free if paid directly to the care provider.

While possible to do, I am not sure why you would need to.

a) Care is assessed on the funds of the person needing it.

b) Money that belongs to a spouse would not be included and nor is the house if a spouse (or certain categories of dependents, I think) are living in it.

c) Once the person needing care's funds drop below ~£23,000 the LA should step in to pick up the cost.

d) If you do that, what happens if you also end up needing care?

Have you taken advice from a suitable IFA, as care needs annuities are only offered by a few companies, and they work with advisers?

Try SOLLA:

We don't want to be at the mercy of the LA. Would rather be self-funding whilst possible.

We are in the 'unfortunate' position that OH's DC cash is trapped in his SIPP courtesy of frozen tax allowances. We are not minded to drawdown at 40% tax. It would therefore be super tax-efficient if we could purchase an immediate needs annuity (when/if required) directly from that SIPP. 

After further research I have established that such an annuity could be purchased for OH's care directly from his SIPP without drawing down. There would be no income tax to pay. I don't think that his SIPP could purchase care for me though so we would have the house as a fall-back if both of us needed care.

Thanks for the answers.

DiaryQueen - do you have any links to something saying that an immediate needs annuity can be purchased directly from a SIPP. I'm in the same boat position trying to find out about this but having very little luck finding the information. Have started to approach advisors as it seems you have to arrange the immediate needs annuity through them in any case.

Thanks

DairyQueen

Sorry but I can't find the links that I referenced in the summer. I suggest that you consult an IFA as I am more sure than not that you can purchase an immediate needs annuity directly using a DC or SIPP. IFA will know and will have the best rates available.

wjr4

fuzzybl said:

DairyQueen said:

LHW99 said:

GDB2222 said:

The annuity needs to be purchased with your own cash. If you have money tied up in a DC pension fund, you can withdraw cash subject to the usual rules. 

Once you have the cash you can use it to buy an annuity for your spouse, and the proceeds will be tax free if paid directly to the care provider.

While possible to do, I am not sure why you would need to.

a) Care is assessed on the funds of the person needing it.

b) Money that belongs to a spouse would not be included and nor is the house if a spouse (or certain categories of dependents, I think) are living in it.

c) Once the person needing care's funds drop below ~£23,000 the LA should step in to pick up the cost.

d) If you do that, what happens if you also end up needing care?

Have you taken advice from a suitable IFA, as care needs annuities are only offered by a few companies, and they work with advisers?

Try SOLLA:

We don't want to be at the mercy of the LA. Would rather be self-funding whilst possible.

We are in the 'unfortunate' position that OH's DC cash is trapped in his SIPP courtesy of frozen tax allowances. We are not minded to drawdown at 40% tax. It would therefore be super tax-efficient if we could purchase an immediate needs annuity (when/if required) directly from that SIPP. 

After further research I have established that such an annuity could be purchased for OH's care directly from his SIPP without drawing down. There would be no income tax to pay. I don't think that his SIPP could purchase care for me though so we would have the house as a fall-back if both of us needed care.

Thanks for the answers.

DiaryQueen - do you have any links to something saying that an immediate needs annuity can be purchased directly from a SIPP. I'm in the same boat position trying to find out about this but having very little luck finding the information. Have started to approach advisors as it seems you have to arrange the immediate needs annuity through them in any case.

Thanks

You cannot purchase an immediate needs annuity via your pension. That would be a lifetime annuity. 

wjr4

DairyQueen said:

Sorry but I can't find the links that I referenced in the summer. I suggest that you consult an IFA as I am more sure than not that you can purchase an immediate needs annuity directly using a DC or SIPP. IFA will know and will have the best rates available.

They can only be purchased via a financial adviser and the adviser needs to be qualified in long term care to advise on these, a lot of which do not have this. 

LHW99

You can search for someone qualified to advise on immediate needs annuities at

https://societyoflaterlifeadvisers.co.uk/