Case Study
Care Annuities and how they can help in guaranteeing care – Mrs Jones’s Care
The following case study is for illustrative purposes only and do not constitute advice.
Care Annuities are a little known but very tax efficient investment and are designed specially to serve just one purpose – to ensure care fees can continue to be paid for however long is required. A care annuity achieves this by paying a guaranteed tax free income* for the rest of the annuitants (person needing care’s) life. They are also referred as care fee annuities or immediate needs annuity and even care fee funding plans.
Care Annuities are purchased by either the person needing care, or more commonly their appointed Power of Attorney, making a single premium investment to the care annuity provider. In return they will guarantee to pay an income either monthly, quarterly or annually (which can either be a level or escalating income) to a registered care provider (care home or care agency) when its paid tax free, or if required to the individual, but then it would be taxed.
It doesn’t matter how long the person requires care for, or where they need care (at home, in a residential care home or nursing home) or how many different care setting are eventually required as the income a care annuity provides is paid indefinitely in indefinite and is portable. Should a change in care be required the care annuity provider simply arranges for the payments to be made to the new care provider. As such they can be a little gem in removing the risk of paying for ever increasing care fees and ensuring care can continue to be afforded. However, as the premium is calculated on medically underwritten assumptions as to how long the care annuity provider may need to pay, in the event of any early demise it can result in you losing money, although for a little extra you can opt to receive at least some of the premium back in such an event.
So now let’s see how a care annuity can help in guaranteeing yours or a relative’s care.
Mrs Jones’ Care Annuity
Mrs Jones’ daughter and Power of Attorney Kathleen contacted us for advice on how she could fund her mother’s residential care fees.
Mrs Jones a widow was aged 89 and had just moved into a nursing home after it was decided she could no longer remain living alone at home due to her increasing dementia.
After meeting with Kathleen, we quickly established that due to her mother’s:
- House being worth £180,000
- Other savings being worth an additional £65,000
- Health not being sufficiently poor to qualify for free ongoing NHS care
She would need to pay for her own care.
Kathleen was concerned that if her mother needed a prolonged period of care she may not be able to continue to afford it especially as the care fees are currently £25,000 per year more than her mother’ s total income.
After discounting the idea of renting out her mother’s property (as it was in need of considerable renovation), Kathleen had decided to sell her mother’s home and wanted to find a way she could guarantee her mother’s care indefinitely especially as Kathleen was impressed with the care being received and wouldn’t want to move her mother just because money runs out.
Care Annuity Solution
After obtaining quotes from all care annuity providers we were able to obtain a care annuity providing a TAX FREE benefit commencing at £25,000 p.a. but allowing for 5% increases each year for just £125,000. This was taken up as it meant that not did the care fees annuity secure her mother’s care, but £120,000 of her mother’s money could be earmarked for the legacies her mother always wanted to make.
This is a fictional used to demonstrate how a care annuity could help and all premiums and fees are for illustration purposes only. We would be pleased to provide you with your own care annuity quotes FREE of charge if you simply click below.