Annuities for care home

[VJK75]

First time post.
Mum, 89 has vascular dementia. She had a fall on 3rd November and has been in hospital since. No broken bones just lost a lot of confidence. The hospital say she now needs full time care. I have been looking at care homes. Mum is just above the threshold and has a house to sell. Does anyone have any experience of annuities? Mum was diagnosed 4 years ago and is now quite thin and frail and had some delerium in hospital. The care home fees are so expensive. Mum doesn't want to go into a home and wants to leave the house to me but I have no option but to sell the house to fund her care. Mum has to be encouraged to eat, drink and she often refuses her medication. It's a nightmare. I am an only child and have no other relatives to discuss this with. It's a huge weight on my shoulders to do the right thing for me and Mum. Any advice would be great.

 

[Chizz]

Hi @VJK75
First, welcome to the forum. There is a wealth of info on the Alz's Soc website that you should investigate.

Secondly - annuities for care fees. You should probably speak with a registered financial adviser. However, my humble view is that I wouldn't buy one, for several reasons.
You should bear in mind that the company from whom you buy an annuity - if you do so - is in business to make a profit. They calculate how long they think your mother will live. How much the fees will be and take into account inflation, where nursing also becomes required etc, The current rates upon which annuities are based are not great.
I don't know what area you are in, as the care home charges vary from area to area, and they depend on the needs of your mum, and I don't know what your mum's property is worth as well, but here goes with a silly example - if they (the annuity co) think your mother may require care home fees for 5 years (the average stay in a care home for a person in their 90's is about 2.5 years), then they know they may have to pay out something in the region of about between £78,000 and £100,000 per year for the first two years, then something in the region of about between £90,000 and £120,000 for the next three years, which thus could total over £550,000 over 5 years, for which they would charge this plus their expected profit %.
Please note that once an annuity is purchased there is no refund on the capital spent in buying the plan. Thus if it cost £600,000 or more for the annuity, and your mum dies within 2 years, there is no refund.
Why pay an annuity co a profit for them, and the gamble on how long your mother lives, when you could sell house, invest money, and pay fees for care home direct. If, sadly your mum dies sooner than later, then, by not buying an annuity, you still have the remainder of the house sale capital.
Just my views.
Best wishes

 

[SAP]

Hello @VJK75 . It does sound like your mum needs 24/7 care now . Any assets she has will have to be sold be it a house, a Van Gogh in the attic or any savings in stocks and shares. I don’t know much about annuities but I have a feeling that sound financial advice would be to not go down this route but to put your mums money where you can access it to pay for her care.

Annuities explained - what are annuities? | Age UK

Annuities offer an income in later life. When you approach retirement, will you cash in your pension pot or get a lifetime annuity? Get annuities advice.

www.ageuk.org.uk

Being the only person responsible for my mums finances I can tell you that it gets complicated enough with out adding more levels to it unless you are a financially very knowledgeable yourself.

 

[nitram]

Any assets she has will have to be sold be it a house, a Van Gogh in the attic or any savings in stocks and shares.

The Van Gogh may not have to be sold.
Chattels are disregarded in financial assessment provided that they were purchased before it was likely care would be needed (deliberate deprivation of capital grey area), family heirlooms are obviously disregarded, selling them makes proceeds available for care.

Personally I would not go for an annuity.
If you do ask about increases in care fees and if any refund if person dies very soon or funding (CHC or section 3) becomes available.

 

[VJK75]

Hi @VJK75
First, welcome to the forum. There is a wealth of info on the Alz's Soc website that you should investigate.

Secondly - annuities for care fees. You should probably speak with a registered financial adviser. However, my humble view is that I wouldn't buy one, for several reasons.
You should bear in mind that the company from whom you buy an annuity - if you do so - is in business to make a profit. They calculate how long they think your mother will live. How much the fees will be and take into account inflation, where nursing also becomes required etc, The current rates upon which annuities are based are not great.
I don't know what area you are in, as the care home charges vary from area to area, and they depend on the needs of your mum, and I don't know what your mum's property is worth as well, but here goes with a silly example - if they (the annuity co) think your mother may require care home fees for 5 years (the average stay in a care home for a person in their 90's is about 2.5 years), then they know they may have to pay out something in the region of about between £78,000 and £100,000 per year for the first two years, then something in the region of about between £90,000 and £120,000 for the next three years, which thus could total over £550,000 over 5 years, for which they would charge this plus their expected profit %.
Please note that once an annuity is purchased there is no refund on the capital spent in buying the plan. Thus if it cost £600,000 or more for the annuity, and your mum dies within 2 years, there is no refund.
Why pay an annuity co a profit for them, and the gamble on how long your mother lives, when you could sell house, invest money, and pay fees for care home direct. If, sadly your mum dies sooner than later, then, by not buying an annuity, you still have the remainder of the house sale capital.
Just my views.
Best wishes

HI Chizz, thank you so much for taking the time to reply. Thats a really good way of looking at it. I feel like I would be throwing away £200K just signing up to it if Mum didn't go on for very long. The care home fees for the one I like are 88k pa and doing the maths this does make sense. At least I have some control over this. Many thanks again. Viv

 

[VJK75]

Hi @SAP , thank you so much for your reply. Mum has a lot of furniture and some antiques but not sure how much they may be worth. A lady from her surgery is going to apply for CHC for us so maybe it's worth a try. Unfortunately I am not a finance expert so keeping things simple sounds like the best plan. It does worry me signing up for these annuities but considering her vascular dementia I worry she's not going to be one of the people that benefit form them.