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Care Home Annuity

JayneB6367

Registered User
Dec 18, 2013
38
Hi ALL,

Has anyone looked at annuity’s for care home payments. I just cannot work out whether they are a good idea or not?

Mum is mid – later stages I think but as we all know that means nothing. She could easily live another 10 years or more (isn’t this disease awful that not only do we have to watch our parent disappear we have to try to work out when they will die and also sometimes wish it was sooner rather than later).

Anyway with savings and the sale of her house I would probably have enough for 5 possibly 6 years.

An annuity of course would cover her for life but would mean selling everything in one go and all the money gone in one fell swoop.

What a choice to make….

I can’t bear the thought that we could be in a situation in 6 years when we have to move her but there are the obvious what ifs….

Any thoughts?
 

Katrine

Registered User
Jan 20, 2011
2,839
England
Hi Jayne, Yes, similar thoughts cross my mind on a regular basis. :(

We looked into a care costs annuity for my mum earlier this year. The advice from the independent financial advisor (SOLLA member) was that it was too late for this to be a good idea for her, given my mum's age and state of health (she is almost 91 and has advanced dementia and other serious health issues). The advisor said you need to have received 4 years of payments from the annuity before you are likely to be in profit on your purchase.

Also, our preference is to keep my mum in her own home with live-in carers, and the annuity providers would only pay out for her 'care costs' if these were being paid direct to an agency employing the carers. Since our carers are self-employed and their agency only provides 'introductions', this would not work for us.

I don't think you would have to spend all your mum's funds on an annuity. You would just work with the advisor to create a projected budget plan so that you purchase an annuity at the right level of financial return. The rest of her money could remain as investments, which would be more flexible to access as and when needed.
 

DMac

Registered User
Jul 18, 2015
535
Surrey, UK
Hi Jayne, I don't have any answers but it's a question that's been intriguing me as well.

Like Katrine, I think it would be useful to take advice from a SOLLA (Society of Later Life Advisers) adviser. This is what I'm currently trying to persuade my family to do.

In essence, I understand a care fees annuity simply takes away some of the risk of the situation. You buy the annuity policy in return for the guarantee that your mum's care home fees are paid for the rest of her life, however long that may be. I understand a typical price would be about 4 times an annual care home cost. So if your mum lives more than 4 years, you're 'in the money' - conversely, if she dies sooner, you lose out. I also understand that the actual price of an annuity would depend upon an assessment of her age, health, risk factors, lifestyle etc.

I'm not sure what happens if the cared-for person develops needs that were not foreseen in the original assessment, or goes on to need continuing health care, in which case I understand their care needs would be NHS funded. I imagine the policy would become invalid at that point. These, and many other questions, I would like to know the answer to. If I ever find out, I'll post on here!
 

KingB

Registered User
May 8, 2011
254
Berkshire
I looked into it when mum went into care - and looks like its a gamble really. It would be nice to pay a lump sum and know everything is sorted for life - but does it cover increases in care costs or only at a certain rate? I think there are lots of small print type issues to check
We didnt go for it because mum is physically very healthy so the lump sum would have been enormous due to longer life expectancy. I imagine its only a good idea if the cost is substantially lower than the person's savings and if they survive longer than expected. In our case it would have taken all mum's savings so would not have protected any capital. Once her money runs out she should be LA-funded anyway, and hopefully will have lived at her current home long enough that she would not be moved.
 

Ladybird23

Registered User
Feb 28, 2014
127
We took one out for my dad. It helped to pay the bills but alas he was only alive for 9 months after we took it out so we lost. But we don't regret it as if he had lived longer the annuity would have been a godsend. Bit if a muddle I know what to do for the best.
 

filbert

Registered User
Nov 5, 2015
3
Worcestershire
What about the person's income? I assume the annuity only needs to cover the difference between income (pensions, etc) and fees.

What happens when the fees increase (which is inevitable)?
 

Pickles53

Registered User
Feb 25, 2014
2,474
Radcliffe on Trent
I looked into it when mum went into care - and looks like its a gamble really. It would be nice to pay a lump sum and know everything is sorted for life - but does it cover increases in care costs or only at a certain rate? I think there are lots of small print type issues to check.
There are different types of annuity, just as there are for pension annuities. You can opt for a flat-rate one or one which increases at a given rate each year. If you talk it through with a specialist financial adviser they will make sure you understand what the deal is.

The quote we got for mum required a capital investment of about 4 years fees. She was 88 and had no other serious health issues except for arthritis. Getting the quote cost about £150. We were seriously considering this option as we felt the security of knowing mum would never run out of money or have to move to a cheaper home was important, but sadly her health took a nosedive about the same time the quotes came through and even the IFA advised against going ahead when the situation was so unstable. She was right, mum died a few months later.
 

JayneB6367

Registered User
Dec 18, 2013
38
Hi All,

I just wanted to update you on this. We had the report done and to cover my Mothers shortfall after pension etc. for her lifetime on an index linked basis was over £350k

I think we need to think of this carefully now as how on earth can you calculate whether this is the right thing to do. It will wipe out her estate which if that happens then so be it but to do this in one go?!

As I said before I hate that I have to think in terms of how long she may be alive. She is fit as a fiddle at the moment albeit definitely mid stages dementia. Do residents live for 6+ years care homes, I suppose they do.

Just replace one set of worries with another with this terrible disease don’t you.
 

Chemmy

Registered User
Nov 7, 2011
7,591
Yorkshire
Hi All,

I just wanted to update you on this. We had the report done and to cover my Mothers shortfall after pension etc. for her lifetime on an index linked basis was over £350k

I think we need to think of this carefully now as how on earth can you calculate whether this is the right thing to do. It will wipe out her estate which if that happens then so be it but to do this in one go?!

As I said before I hate that I have to think in terms of how long she may be alive. She is fit as a fiddle at the moment albeit definitely mid stages dementia. Do residents live for 6+ years care homes, I suppose they do.

Just replace one set of worries with another with this terrible disease don’t you.
I looked into it back in 2005 and decided against it. I'm pretty sure I was quoted about £90k back then. My mum was in the care home eight years. :rolleyes:

 

PeggySmith

Registered User
Apr 16, 2012
1,683
BANES
Just one more thought. MIL' s NH would let her stay on with LA funding if the money runs out. She is currently getting CHC funding after 2 yrs of being self funding.
 

Pickles53

Registered User
Feb 25, 2014
2,474
Radcliffe on Trent
Hi All,

I just wanted to update you on this. We had the report done and to cover my Mothers shortfall after pension etc. for her lifetime on an index linked basis was over £350k

I think we need to think of this carefully now as how on earth can you calculate whether this is the right thing to do. It will wipe out her estate which if that happens then so be it but to do this in one go?!

As I said before I hate that I have to think in terms of how long she may be alive. She is fit as a fiddle at the moment albeit definitely mid stages dementia. Do residents live for 6+ years care homes, I suppose they do.

Just replace one set of worries with another with this terrible disease don’t you.
I guess she must be pretty fit physically as for my mum it wasn't the equivalent of 6 years, more like 4. I seem to remember there was an option to take out a lower cost annuity to cover only a part of the fees, or to pay out at a flat rate leaving the annual increases to be paid out of remaining capital. Might this 'halfway house' be an option?
 

Pickles53

Registered User
Feb 25, 2014
2,474
Radcliffe on Trent
Just one more thought. MIL' s NH would let her stay on with LA funding if the money runs out. She is currently getting CHC funding after 2 yrs of being self funding.
That was also the deal in mum's care home if a resident had self-funded for 3 years they would guarantee accepting the LA rate so she would never have had to move for financial reasons.