Care annuities

[LouiseB55]

Hello TP. Mum now needs full time care. Her house will need to be sold and she will be self funding.

I've had quotes for a care annuity and wondered if anyone else has looked at this as a way of covering care costs?

The cost of the annuity seems to be roughly the equivalent of 6 years care home fees and covers increasing costs in line with inflation.

 

[Kevinl]

Inflation and care home inflation are two very different things, I'd allow about 10% for care home increases and you'd have to factor in any increases if your mum's condition gets worse, the care home might want to increase them for that reason too. Should she need to move into a nursing home again they may go up even more.
As far as I'm aware the income from the annuity will be liable for income tax so you might need to allow for too when doing the sums.
K

 

[mancmum]

I was told that if the annuity was paid directly to the agency providing care then it was not subject to income tax and this is confirmed by Money Advice Service, so for anyone paying tax this can represent a reduction in care home fees.

https://www.moneyadviceservice.org.uk/en/articles/immediate-needs-annuity

Personally I feel that in a time of of extremely low interest rates it does represent a way of doing away with some of the worry of chasing the best offer you can get on savings accounts, especially since you are duty bound as attorney not to undertake risky investment.

Obviously the only real solution is to have effectively funded care for all but in the meantime we just do what we can.

 

[BIWO]

When we looked into this, we did not have a sufficiently large enough lump sum to get enough income from the annuity!. I think were looking at what £300K could raise - and not alot. The difficulty is that when someone goes into a CH there is no idea how long they will be there for so the dichotomy is how long the money will last and where best to invest the money to get the ROI.

 

[love.dad.but..]

I looked at it briefly and arrived at the same conclusions as BIWO...and as it turned out dad would have no where near gained from the risk taken before he died last year...3 years in a nursing home.

 

[BIWO]

I looked at it briefly and arrived at the same conclusions as BIWO...and as it turned out dad would have no where near gained from the risk taken before he died last year...3 years in a nursing home.

My brother found a stat when were looking into this that the average time living in a CH was two years - My Mum was in hers for just 14 months - so her case, would not have benefited from the investment. I am sure that acctuaries look at all of this and hence offer a higher number of years than reality. Its a horrible 'gamble' to place the onus on families to decide how to best stretch the money out.

 

[love.dad.but..]

My brother found a stat when were looking into this that the average time living in a CH was two years - My Mum was in hers for just 14 months - so her case, would not have benefited from the investment. I am sure that acctuaries look at all of this and hence offer a higher number of years than reality. Its a horrible 'gamble' to place the onus on families to decide how to best stretch the money out.

I can't remember exactly but for the investment required I think he would have broken even at about the 5 year mark from the company I contacted.

 

[Raggedrobin]

I looked into this and found it not viable for my mother but I met someone who got one for their parent and it worked out very well for them, the person lived to a ripe old age and it was all paid for by the annuity, which ahd been raised by selling her house. This person didn't have dementia though. I guess so much depends ln life expectancy. It is a kind of gamble on that, I suppose.

 

[Leeds]

I looked into this and found it not viable for my mother but I met someone who got one for their parent and it worked out very well for them, the person lived to a ripe old age and it was all paid for by the annuity, which ahd been raised by selling her house. This person didn't have dementia though. I guess so much depends ln life expectancy. It is a kind of gamble on that, I suppose.

Have you considered the deferred payment scheme offered by the local authority and renting out the house x

 

[Lynn3328]

Hello TP. Mum now needs full time care. Her house will need to be sold and she will be self funding.

I've had quotes for a care annuity and wondered if anyone else has looked at this as a way of covering care costs?

The cost of the annuity seems to be roughly the equivalent of 6 years care home fees and covers increasing costs in line with inflation.

I have been working with a company who specialise in arranging care annuities and have go t a very good offer, but the care home have said they don't want fees for residents coming from two different sources. If the money goes to the care home it is tax free. Not all care homes seem to understand care annuities. L

 

[Lynn3328]

What percentage increase is usual for care homes. When I was researching the one my mum is now in the Director was vague about price increases, anything from 5%-10%. In December we recieved an invoice saying the fees were going up in January by 10%. L

 

[Raggedrobin]

Have you considered the deferred payment scheme offered by the local authority and renting out the house x

Thanks Leeds, those weren't suitable options I have long since sorted out funding, I was just mentioning annuities re the OP but thank you.

 

[love.dad.but..]

What percentage increase is usual for care homes. When I was researching the one my mum is now in the Director was vague about price increases, anything from 5%-10%. In December we recieved an invoice saying the fees were going up in January by 10%. L

It varies considerably between homes. The dementia NH dad was a resident in had increases each year of his 3 years of around 8% but regardless of giving an indication they can pretty much apply as much as they want. I was told initially generally increases were no more than 5% usually!

 

[Raggedrobin]

The home my mother is in hasn't had an increase in the four years she has been in there.

 

[Nikki C]

I have been looking at these annuities because I was told by my IFA that, as her attorney (LPA), I could not invest the money from my mother's house unless I had considered one of these annuities. I spoke to 5 IFAs who 'specialise ' in Later Life Care and their fees to set one up varied wildly. But it would cost an upfront fee from £500 - £1200 plus a % of the amount invested from 1.5 - 3.5%. A total cost of between £4,000 & £6000 for an care annuity of £160,000 . I feel that this is a huge outlay in fees and costs and, as my mother is 87, I doubt she would live long enough to make this worthwhile. However i feel co-erced into at the least the upfront fee in order to be able to invest the money In other things like bonds. This behaviour is justified by them saying that if challenged in court for investing by yourself (in your loved one's name) then you are protected by having spoken to them. I feel many people could be pressured into this if they are not strong one finance.

 

[jenniferpa]

I agree with you @Normaleila.

While I don't think the ifa said that they had to purchase an annuity, they do seem to be saying that failure to consult an ifa before doing any investing could lead to you being accused of not performing due diligence.

Frankly, I would say paying out large sums of money to an ifa who suggested that is more likely to result in a wasting money accusation. I'm not saying it might not be a valid option to do so, but I'd steer well clear of one who made this sort of statement.

 

[Freewomen]

I have been working with a company who specialise in arranging care annuities and have go t a very good offer, but the care home have said they don't want fees for residents coming from two different sources. If the money goes to the care home it is tax free. Not all care homes seem to understand care annuities. L

Hi, can you let me know the name to the company you got a very good offer from?