Paying for Care


Paying For Care

Following an assessment of your care needs and your financial position, it is not uncommon to find that you have to pay for the provision of care yourself. This is a situation that affects many thousands of people in the UK and which requires careful consideration.

When you reach this stage it is time to seek financial advice. There are a number of ways to proceed, even if you have savings. It is essential that you find the most effective solution which suits both your care and financial requirements.

You should contact a Care Fees Adviser, preferably a suitably qualified individual, accredited by SOLLA (Society of Later Life Advisers). They will be able to review your situation and suggest the best way forward.

Care fees can be funded by a variety of methods, some of these are listed below;-

1. From your income

For example, if you have sufficient regular income from pensions or other sources to cover the cost of your care.

2. Using your investments to create an additional income flow

As there are very few people who can pay for long term care from their regular income or pensions, it may be possible to rearrange your assets to produce the steady stream of income required.

3. Using your property to release funds

The majority of equity release schemes are designed for people who want to be able to stay in their own home. This solution may be appropriate if you decide to have care at home, or where one spouse needs residential care, but the other continues to live at home.

4. Buying a Long Term Care Income Plan

You could consider specialist long term care plans: these can only be provided by specially qualified care fees advisers. SOLLA accredited advisers are qualified to provide advice in relation to these plans, which use a lump sum payment to purchase a Long Term Care annuity. The company which provides the annuity pays out an income to help fund your fees for as long as you live. The income from the plan is paid tax free if it goes to a care provider registered with the Care Quality Commission. There are different options available, but your adviser will be able to recommend the most suitable option for your specific requirements.
Below are some case studies which you may find useful when assessing your needs:-

Case Study 1

Mrs Jones was 93 in 2006, and at that time the total value of her estate was around £380,000. She had a shortfall in her income to pay her care home fees of £15,000 per annum. She purchased a Long Term Care annuity to cover this shortfall, and arranged for the income to increase by 5% per annum. The annuity cost £57,000.

Mrs Jones passed away in May 2012 at age 98, having enjoyed a total income of £92,454; tax free, from the annuity.

Case Study 2

Mrs Smith, age 77, was suffering from Dementia when she moved into a care home. The shortfall in her income to cover her care costs was £20,000 per annum; however the value of her estate was £700,000.

The cost of purchasing a long Term Care annuity to cover this income shortfall, increasing at 5% per annum, was £81,453, which represents just 12% of her estate.

The average life expectancy of a Dementia sufferer diagnosed at age 70 is 10 years, and at age 90 is 3 ½ years, therefore it is likely that she will live for at least 4 years, after which time, she will have had a full return on the capital outlay.

Case Study 3

Mr Phillips, who was 87 years old, shared a house with his daughter and decided to move into a care home of his choosing, while he was still fit and well enough to enjoy his lifestyle. He had a shortfall in his income of £16,500 per annum. He had assets comprising his share of the value of the house, and savings in the region of £80,000.

The premium required to cover the income shortfall, increasing at 5% per annum, was £68,000 and, knowing that his care costs were taken care of, allowed Mr Philips to gift his share of the property to his daughter.

Note that whilst the above case studies are based on real life situations, the names of the clients have been changed to protect their identity. Long Term Care annuities are based on health and life expectancy, and require an underwriting decision.
For further advice, and for a no cost, no obligation initial meeting, please contact:

Sally RollinsonSally Rollinson FPFS at Cardale Financial Planning on 01423 534100

or email: sally.rollinson@cardale-fp.co.uk