IMMEDIATE NEEDS CARE ANNUITY | February 2024- A Guide.
Immediate care annuity

February 2024

Immediate Care Annuity in February 2024

 

This article addresses some of the most common questions and worries about care annuity. It gives you an explanation of:

  • What an immediate care needs annuity is
  • How a care annuity works
  • How the terms and rate of a care annuity change
  • Who might use this type of product
  • The pros and cons of immediate annuity for care

So that you can use this information to make an informed decision about whether an immediate needs annuity looks like a good choice for your circumstances.

Topics that you will find covered on this page

1 – What is a care annuity?

One of the biggest worries for older people is funding care in the long term. There is no way of knowing for certain how long you will need to live in a care home, and given that the cost of care can average at over £1000 per week, it is important to think carefully about a care funding plan for the future.

An immediate care annuity is an option that can give you peace of mind. Essentially, it is an insurance policy that covers your care fees for the rest of your life by providing you with a guaranteed lifetime income. Similar to a pension in some ways.

You buy the care fees annuity upfront with a one-off premium payment to an insurance company. The amount of money that the policy will cost you depends on:

  • How old you are. If you are of an older age, you will pay less upfront.
  • The state of your health. The healthier you are, the more you can expect to have to pay.
  • The level of current and future care fees that you’re anticipating

It can help knowing that you will never run out of money for your long term care, even if you live well past your life expectancy.

Your insurance policy will mean that you always have the funds to pay for your care home fees without your family needing to make up any shortfall.

Whist they wont help you avoid care home fees what they will do is help you plan the cost of going in to a care home.  They are unlikely to be suitable for planning home care costs

Here is a video from UK Care Guide explaining how a care annuity works.

Types of care home annuity

There are two main kinds of annuity for care home fees:

  • An immediate needs annuity. This gives you funding immediately for the care that you need, starting straightaway.
  • A deferred annuity. This policy funds any care you may require in the future, starting between 1 and 5 years in the future. These plans are less expensive but have more risk involved.

You should speak to someone such as a professional adviser for more advice on which product is best for your situation.

2 – How does an immediate annuity work?

An immediate need care fee annuity is a type of annuity that you can take out while in retirement.

You make a one-off lump sum payment to the insurer, and then they guarantee that a regular income will be paid directly to your care provider for the rest of your life.

How much are annuity rates?

Care fee annuity quotes range between individuals and providers. This is because every immediate annuity care plan is underwritten.

That means that the annuity service insurers need to collect information about the state of your health. They may speak to both your GP and your care home or home care providers to receive these details.

Insurers would like to know about any factors which may affect your life expectancy before deciding your annuity rates and telling you what you need to spend on a premium.

The exact amount you need to pay for this premium will, therefore, depend on your age, your health, and the estimates for the total cost of your care funding. 

Click the button below to get a free personalised quote from

Care-Fees Annuity.co.uk

Care-Fees-Annuity is a trading name of Keith Hargraves, an appointed representative of 2plan wealth management Ltd.  Keith Hargraves is authorised and regulated by the Financial Conduct Authority and is entered on the FCA register (www.fca.org.uk) under reference 534065. If you take out a product via Care-Fees-Annuity, we will receive a fee for introducing you to them. Care-Fees-Annuity provides initial quotes free of charge and without obligation. By contacting Care-Fees-Annuity through us, the cost of any product would be the same as if you had contacted them directly. The fee we received is used to help keep our site operational and to produce new content.  

Would you like to know how much a Care Annuity will cost you?

The premium you pay will also be impacted by the percentage of capital you want to have the ability to protect in case of early death. The higher the percentage, the more the product will cost at the outset.

If you would like the income payout to increase in line with inflation – so that you are insured against the costs of your care plan increasing in the future – then your premium will also cost more.

Many older people use money from their savings, state pension, or from equity release to make these initial annuity payments.

You should speak to an advisor to learn more about the cash figures you may need to pay for an immediate needs annuity service. They can help you choose the best course of action when it comes to affording your care costs.

"One of the biggest worries for older people is funding care in the long term. There is no way of knowing for certain how long you will need to live in a care home, and given that the cost of care can average at over £1000 per week, it is important to think carefully about a care funding plan for the future."

Who is an immediate care annuity suitable for?

An immediate care annuity may be suitable for customers who fit the following profile:

  • Someone over 60 years of age.
  • Someone who is already in nursing care or a care home, or someone needing care support in their own home.
  • Individuals who have health issues and would like more peace of mind about the payment of their future nursing care contribution fees.
  • Individuals who are likely to be expected to pay the full care costs themselves from their pension savings in retirement, and don’t want to use up all their savings or sell their house in the process of affording their care price.
  • People in retirement who wants to protect the assets they have for their family estate. For example, you may want to protect your house and its market value.
  • People who have enough money to spend on the premium payment and don’t think they will want that money back in the future.

An immediate needs annuity is not be intended for those who only need temporary care, or those who do not have fees they need to pay now. In those cases, you should look into deferred annuity schemes.

It is essential that you understand your legal rights and how the features of immediate needs annuity work before signing your consent to an annuity.

You should seek professional, independent advice about the options you have available.

For example, an adviser can talk you through the add-ons such as: a deferred scheme, death benefit payouts, escalation, capital protection, and options for inheritance tax planning.

Case Study – Funding Mrs Jones Care

Mrs Marshall’s daughter and POA Rebecca wanted advice on how she could fund her mother’s residential care fees as her mum Evelyn aged 85 could no longer safely look after herself and she was suffering from mild dementia and had recently moved into a lovely care home and had settled very well.

Her care fees were currently £1,050 per week and she was only receiving £ 473 p.w. from pensions and Attendance Allowance, and Evelyn wasn’t entitled to any free NHS Continuing Healthcare nor Local Authority assistance as Rebecca had recently sold her mother’s house and so had savings of £335,000

Writing out cheques of £4,550 per month, Rebecca was becoming increasingly concerned about how quickly her mother’s savings were eroding and wanted to secure her care and if possible, protect some of her mother’s savings for her and her siblings as this was something Evelyn had always intended.

Rebecca had heard about care fee annuities from her mother’s care home but knew very little about them so contacted specialist care fee advisers Care Fees Annuity to find out more.

care annuity a good idea

Solution

After hearing about how a care fees annuity would provide a tax-free income for the remainder of her mother’s life no matter how long she lives, would help cap the cost of care and therefore, help preserve any remaining money for beneficiaries and would only need to provide the difference in the cost of care -£30,000 p.a. rather than the full cost, Rebecca asked us to get some quotes.

As each annuity is individually priced based on the person own medical records and need for care and can vary considerably between providers, we obtained quotes from all providers and after a few weeks delay whilst medical records were obtained, we were able to report that Rebecca could obtain a 5% escalating annuity providing initially £30,000 for just one single premium of £154,620.

As this would help preserve £180, 380 of mum’s savings and ensure her mum could continually receiving the care she was getting after discussing it with her siblings Rebecca asked us to set it up.

Mrs Marshall is a fictional case, and all premiums and fees are for illustration purposes.  If you are acting for someone and would like to discover just how much a care fees annuity might cost, Care Fees Annuity.co.uk would be please to provide you with your very own quotes form all available insurers -FREE OF CHARGE.

Annuity quotes

The table below provides examples of what a £20,000 annuity would cost you at different ages, as of October 2022, and are now out of date.  They should be used for indicative purposes only..  Please note that your actual quote will differ depending on a range of factors.

AgeNon-increasing annuityAnnuity escalating by 5%
75£115,125£137,335
80£111,173£130,512
85£92,922£105,628
90£81,262£89,890
95£63,960£69,065
100£60,249£64,570

Where an immediate needs annuity is paid directly to the care provider, is the benefit tax-free?

When annuity income is paid directly to a registered care provider, the money is tax free.

However, one of the terms of an immediate care plan annuity is that the policy has a flexible payee. So, if you no longer need care, the income can be changed to be transferred directly to the customer, rather than to your care providers.

When this happens, however, you should be aware that the money will be subject to income tax.

Later, if you are receiving care once again and must pay care costs, you can switch back to making each income payment directly to the nursing home. Then the money will once again be tax free.

3 – How much does an immediate annuity pay?

An immediate needs annuity will continue to contribute funds towards the cost of your care plan for the rest of your lifetime.

It is essential that you speak to a specialist financial adviser before making a decision about whether an immediate needs annuity is the right option for your individual conditions.

Advisors can talk you through who are long term care annuity providers, give you an estimated immediate needs annuity quote, and discuss alternative ways of paying for care costs.

Advantages

  • It may feel reassuring and give you peace of mind to know that your family will never have to pay for your care home place.
  • One of the other main benefits is that the income you get is tax free if transferred directly to the care provider.
  • Another benefit is that income is also guaranteed to be paid to the registered care provider for the rest of your life.
  • Some annuity providers allow you to build in additional protection for your family. For example, if you purchase capital protection alongside your plan and die before your life expectancy predicted, then your beneficiaries will receive a percentage of the capital back according to the difference.
  • You can set your product to increase in line with inflation each year. However, this is one of the benefits that will increase the amount of the initial premium payment rate.

Disadvantages

  • The lump sum payment for an immediate needs annuity may be incredibly expensive.
  • If you don’t account for inflation or a change in care fees within your annuity agreement, not all your care fees will be covered by the income. This depends on the provider, the increase in rates, and whether your condition becomes worse over time. In that case, families actually need to make up the shortfall..
  • You cannot cancel immediate needs annuities as they are a lifetime agreement between you and the insurance company.
  • This means that if you no longer need care home costs support, or if you become eligible for NHS Continuing Healthcare funding or Attendance Allowance, any income you get may be paid to you instead of a nursing home or care provider. However, you will then need to pay income tax on this amount.
  • Because you cannot cancel the plan, you may receive less money in income than you originally put in with your one off lump sum
  • A life annuity contract can take a long time to complete. This is because immediate needs annuities are underwritten and the insurance provider needs time to gather information about your health records from your GP.
  • Immediate needs annuities may impact your entitlement to means-tested state benefits, your tax position, and your state pension credit. Contact a financial adviser for tax advice and individual guidance.

Before agreeing to any terms or making a payment, speak to an independent professional adviser.

 

Click the button below to get a free personalised quote from

Care-Fees Annuity.co.uk

Care-Fees-Annuity is a trading name of Keith Hargraves, an appointed representative of 2plan wealth management Ltd.  Keith Hargraves is authorised and regulated by the Financial Conduct Authority and is entered on the FCA register (www.fca.org.uk) under reference 534065. If you take out a product via Care-Fees-Annuity, we will receive a fee for introducing you to them. Care-Fees-Annuity provides initial quotes free of charge and without obligation. By contacting Care-Fees-Annuity through us, the cost of any product would be the same as if you had contacted them directly. The fee we received is used to help keep our site operational and to produce new content.  

Would you like to know how much a Care Annuity will cost you?

Article author

Katy Davies

I am a keen reader and writer and have been helping to write and produce the legal content for the site since the launch.   I studied for a law degree at Manchester University and I use that theoretical experience, as well as my practical experience as a solicitor, to help produce legal content which I hope you find helpful.

Outside of work, I love the snow and am a keen snowboarder.  Most winters you will see me trying to get away for long weekends to the slopes in Switzerland or France.

Email – [email protected]

Frequently Asked Questions

What is a care annuity?

One of the biggest worries for older people is funding care in the long term. There is no way of knowing for certain how long you will need to live in a care home, and given that the cost of care can average at over £1000 per week, it is important to think carefully about a care funding plan for the future.

An immediate care annuity is an option that can give you peace of mind. Essentially, it is an insurance policy that covers your care fees for the rest of your life by providing you with a guaranteed lifetime income. Similar to a pension in some ways.

How does an immediate annuity work?

An immediate need care fee annuity is a type of annuity that you can take out while in retirement.

You make a one-off lump sum payment to the insurer, and then they guarantee that a regular income will be paid directly to your care provider for the rest of your life.

How much are annuity rates?

Care fee annuity quotes range between individuals and providers. This is because every immediate annuity care plan is underwritten.

That means that the annuity service insurers need to collect information about the state of your health. They may speak to both your GP and your care home or home care providers to receive these details.

Insurers would like to know about any factors which may affect your life expectancy before deciding your annuity rates and telling you what you need to spend on a premium.

How much does an immediate annuity pay?

An immediate needs annuity will continue to contribute funds towards the cost of your care plan for the rest of your lifetime.

Because an annuity continues to fund your care plan in this way, it is hard to place a specific estimate of how much you will receive via income payments. The payments will continue for the remainder of your lifetime – so you will receive more money the longer you live.

Financial promotion

Please note that HelpandAdvice.co.uk has no link or connection with 2plan. 2plan wealth management Ltd is authorised and regulated by the Financial Conduct Authority. It is entered on the Financial Services Register (www.fca.org.uk) under reference 461598. They have, however, approved the links on this page to Care-Fees-Annuity.co.uk who can obtain annuity quotes for you.
 
Care-Fees-Annuity is a trading name of Keith Hargraves, an appointed representative of 2plan wealth management Ltd.  Keith Hargraves is authorised and regulated by the Financial Conduct Authority and is entered on the FCA register (www.fca.org.uk) under reference 534065. If you take out a product via Care-Fees-Annuity, we will receive a fee for introducing you to them. Care-Fees-Annuity provides initial quotes free of charge and without obligation. By contacting Care-Fees-Annuity through us, the cost of any product would be the same as if you had contacted them directly. The fee we received is used to help keep our site operational and to produce new content.  

Disclaimer: Please be aware that this site is no longer under active management. As a result, we cannot assure the accuracy or relevance of the content provided. Visitors should use their discretion and consider the potential for outdated or inaccurate information before relying on any material found here.

Do you want to get a quote for a care fees annuity?

Care-Fees-Annuity is a trading name of Keith Hargraves, an appointed representative of 2plan wealth management Ltd.  Keith Hargraves is authorised and regulated by the Financial Conduct Authority and is entered on the FCA register (www.fca.org.uk) under reference 534065. If you take out a product via Care-Fees-Annuity, we will receive a fee for introducing you to them.

Disclaimer: Please be aware that this site is no longer under active management. As a result, we cannot assure the accuracy or relevance of the content provided. Visitors should use their discretion and consider the potential for outdated or inaccurate information before relying on any material found here.

Do you want to get a quote for a care fees annuity?

Care-Fees-Annuity is a trading name of Keith Hargraves, an appointed representative of 2plan wealth management Ltd.  Keith Hargraves is authorised and regulated by the Financial Conduct Authority and is entered on the FCA register (www.fca.org.uk) under reference 534065. If you take out a product via Care-Fees-Annuity, we will receive a fee for introducing you to them.