We've been looking into annuities, being advised by Saga's service, and here are some ballpark figures that might be helpful (though everyone's circumstances are different).
Mum (86 years old, vas-d, generally physically fit though a multiple-times mini-stroke sufferer with heart failure and diet-controlled diabetes) will be self funding and after her income is taken into account we will have a shortfall of £17,000 per year. We discussed perhaps getting quotes for an annuity to give just enough, but were advised – and we agreed – that it would be better to build in a cushion for unforeseen costs and rises in fees.
So, we're looking at an annuity that pays £19,000pa, which would give us a cushion of just over £2000 per year.
£115,000 gets you one that stays fixed at £19,000pa.
£124,000 gets you as above, but with a protection plan that repays 50 per cent of the original cost, minus any payments already made (so you can see that the total of the refund would diminish rapidly, so is it really worth the £9000 extra?).
£140,000 gets one that goes up by 5 per cent per annum.
We're waiting for a quote on one that rises by 3 per cent.
We were advised to try to get assurance from the care home that the fees will not rise by more than a certain amount pa, say 3 per cent, explaining to them that we are looking to buy an annuity that rises by that much (even if we choose to get the 5 per cent one – they don’t have to know that). The advisor said that in many years of offering this advice, they've only once come across a care home that has refused to do so. As the advisor pointed out, a resident with an annuity is a desirable one.
I found this interesting: it’s actually that the full sum from the monthly annuity goes to the care home, and Mum’s income then covers the shortfall. So when one talks about having a £19,000 annuity that has a built-in cushion, the way the ‘cushion’ manifests itself is that less money each month comes from Mum’s own account, so a bit of an excess builds up there. That does make it very easy to see what’s what, because we'd know that what’s in Mum’s account/savings is hers to spend, save etc as she/we decide.
And yes, as mentioned elsewhere here, an annuity paid directly to the care home is tax-free.
Hope that's of some help. It's a pity the original poster hasn't come back with their experiences, though maybe they're still wading through it all.