Purchase immediate needs annuity for care home fees?

Joey_Soap

Good afternoon all. I am looking for a quotation for an immediate needs annuity for my father's care home fees. It seems you can only purchase one through a financial adviser. There's only four insurance companies that write these policies. The fees for the adviser arranging an annuity are 4% of the policy premium. It seems an incredibly high fee for a simple form and an annuity quotation. The premium is likely to be in excess of £120,000. The fee therefore 4% of that

My question is, does anyone know of an adviser who would get me the annuity quotations for a reasonable flat fee? I would do it myself if I could but it seems I simply can't.

Any suggestions are welcome.

Thank you.

Shedman

Try Eldercare Group. https://www.eldercaregroup.co.uk

We used them (admittedly 7 years ago now) for MiL care home fees and If I recall correctly they gave us an indicative quote for free and then, if we wanted to progress, there were two choices as to the fee - pay for a report for around £550 (with no obligation to proceed if we didn't think the solution was suitable ) and then a reduced % fee or get the report for 'free' but with a higher fee. I think we went for former option and paid 3.5% (which was better than the other fees we were quoted and most, if not all of those, wouldn't give an upfront quote without the whole fee being paid).

They were very good, helpful and informative and not at all pushy and gave quotes for a number of different scenarios (eg level or increasing payments, deferred payment start (I yr, 2 yr), different periods of guarantee of return of partial premium in event of early death. In the end they managed to negotiate a decent reduction in the initial quotes (esp given at that time there were only two providers - Aviva and Just). And I'm glad to say MiL survived long enough in care home to 'win' vs the premium paid

Edit: As I'm away at moment I don't have all the docs to hand so may have misremembered some of detail above but would still recommend giving them a ring to see what they can offer. Try to speak to Nicky Cave (MD) or Roger Beeley as found them very helpful.

Joey_Soap

Thanks @Shedman I'll look at that.

TcpnT

I used Eldercare a few months ago to arrange a policy for my mother. The whole process was very efficient and straightforward. They go through the whole application process and provide quotes with no charge. You only pay them if you decide to take up a quote. Charge is fixed at 3.5% of the premium. I don't believe that there is any flexibility in that. They are specialists in this particular area and it is pretty much all they do.

Joey_Soap

Thanks @TcpnT so it looks like a ~4% charge as I have been quoted is the industry norm.

It seems to me that like everything else involving financial advisors, it's a complete rip off. To this point, I have managed to never have to use one. But for immediate needs annuities it looks like you can't do it yourself.

I have the form to fill in, just six sections and there's only four insurance companies that provide these policies, how hard can it be? Looks like a business opportunity for someone.

Shedman

https://forums.moneysavingexpert.com/discussion/comment/81857686#Comment_81857686

Not a large market so very limited demand hence why there are so few insurers (I'm quite surprised you found 4 …as I said only 2 when we were looking with an expectation of a 3rd possibly re-entering the market), requirement to be a SOLLA accredited advisor (which adds to costs and limits competition) and probably a lot more work than just filling in 6 forms (e,g, providing multiple quotes covering a large number of variables, chasing the required medical reports etc) so probably not a big opportunity for market disruption. Not defending them and I agree 4% sounds a lot but even on £120k that's "only" £5k (or one months care home fees). If we had been able to do it ourselves I reckon we probably would have been stuck with a premium in line with the indicative quote, but with the additional discount Eldercare negotiated their fee was effectively covered. So can't say we felt ripped off.

Joey_Soap

Thanks again @Shedman appreciate the perspective from your own experience. Nothing better than someone who's done this.

I have contacted the IFA you suggested and their fees are indeed as you said.

Doing a bit more research myself around the advisor list on SOLLA's website I think I can get the annuity quotations work done for a fixed fee or a per cent age fee quite a bit lower than the 3.5/4% I have been quoted locally. Whether a lower fee is preferable over an advisor negotiated discount annuity premium, I don't know. I'm not sure there's a way to work that out as there's unknown numbers involved.

I'll leave it at that for now but I will of course name IFA names should this work out well.

Thanks again for your input.

Shedman

https://forums.moneysavingexpert.com/discussion/comment/81858724#Comment_81858724

Good luck getting it sorted and calculating if it's worthwhile. Took me a lot of spreadsheeting to assess all the options (including just leaving premium monies on deposit) vs multiple assumed dates of death (which obviously depend on health, age at inception), inflation/interest rate assumptions and anticipated increase in care home fees, etc to see if the annuity made sense. It was a bit marginal - she was 86 and my assumptions meant she needed to live for 6 years to beat the insurers. But there was the added upside/comfort that should she live for more than 8 years then instead of running out of money the annuity income would extend that to over 15 years (ie past 100). So, although it was a bit marginal, that latter element swung it. As it turned out she lived just over 6 1/2 years.

PS don't believe the often trotted out trope that care home residents only live less than 2 years on average as is distorted in that it includes LA funded residents who in general are in much poorer health and, of course, the LAs are reluctant to fund until it's absolutely necessary. When I looked into it further the age distribution was a skewed Bell curve with a sharp slope to a peak around 2-3 years but with a very long gradually sloping tail to 20+ years….

dunstonh

PS don't believe the often trotted out trope that care home residents only live less than 2 years on average as is distorted in that it includes LA funded residents who in general are in much poorer health and, of course, the LAs are reluctant to fund until it's absolutely necessary.

The type of care home matters. Residential homes are longer than nursing homes.

The British Geriatrics Society reports that average life expectancy in UK care homes is 24 months (2 years) for care homes without nursing and 12 months (1 year) for care homes with nursing. A BUPA study of over 11,000 care home residents found an average stay of 801 days (approximately 2.2 years), though the median was only 462 days (1.3 years), with 55% surviving the first year.

The ONS measure ages rather than home type. Data from 2021-2022 shows:

• Ages 65-69: 7.0 years for females, 6.3 years for males
• Ages 75-79: 4.6 years for females, 3.5 years for males
• Ages 85-89: 3.5 years for females, 2.6 years for males
• Ages 90+: 2.9 years for females, 2.2 years for males

Joey_Soap

Thanks again for the further comments. Dad is 94 heading towards 95. He's frail but has a good appetite, doesn't look 94 and longevity genes are in the family. I'm hoping his already advanced age with go in our favour when it comes to buying a single premium care annuity. My feeling is that once the money is gone, that is it. It's gone. At least the rest of his estate will be pretty much safe.

I have identified two possible advisors who will arrange the annuity significantly cheaper than 3.5/4%.

And I have also identified a couple of advisors who, let's say, aren't exactly transparent with their fees until you ask the right questions.

I will share what I find from my experience, good or bad as this unfolds. Thanks for the ongoing interest in this.

wjr4

https://forums.moneysavingexpert.com/discussion/comment/81860128#Comment_81860128

you can include protection eg capital protection