One of the biggest challenges of funding for care is uncertainty around how long someone will live for and whether they go into a care home or require care in their own home. We also acknowledge that care fees can be very costly. So what does this mean in terms of risk? 

If you underestimate how long someone will live, they could run out of money and be left without the care they want and need. 

It’s impossible to know how long someone may live in a care home but there are statistics on life expectancy and average stays in a care home, which should be considered when putting a financial plan in place. 

This creates uncertainty. It's difficult to predict how long someone might spend in a care home and the impact of a long stay can be financially devastating.


What is an immediate needs annuity?

An immediate needs annuity provides a guaranteed monthly payment for life to help pay for your client's care fees. 

In exchange for a single premium, an immediate needs annuity pays a monthly payment to the individual's UK registered care provider for the rest of their life. Fees are likely to increase with inflation over time and there are two ways to deal with this:

  • Firstly, your client can choose for payments to increase by a fixed percentage or in line with RPI to help mitigate the impact of future fee increases.
  • Secondly, fee increases could be paid for from other assets if available.

Either way, the guaranteed lifetime payment will remove a lot of the financial uncertainty when someone is required to self-fund their care.


Advantages and disadvantages of an immediate needs annuity

Advantages Disadvantages
  • Peace of mind that a guaranteed payment will be paid towards care fees.
  • Under current legislation there is no tax to pay on the payments if they're paid to a UK registered care provider. However, the rules governing tax may change in the future and could affect your client’s payments. 
  • Ringfencing a portion of your client's wealth so that you can protect your client's remaining assets.
  • Flexibility around who the payment is paid to if your client changes care providers or no longer needs care. 
  • Your client could get back less than they paid for the plan.
  • If your client no longer requires care, or becomes eligible for NHS funding, they may not cancel their immediate needs annuity. However, it can be paid directly to the individual, but may be subject to income tax.
  • Receiving payments from an immediate needs annuity may affect your client’s ability to claim for means-tested state benefits.


Who might an immediate needs annuity be suitable for?

  • Somone looking for peace of mind that some of their care fees will be paid for the rest of their life.
  • Someone looking to mitigate the risk of running out of money.
  • Someone looking to protect any further assets they may have.

Lifetime Care Plan

Our immediate needs annuity, Lifetime Care Plan, could help your clients fund their care needs.

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