Long term care is a difficult subject for advisers to bring up with clients. However, there are a number of solutions available for those looking to fund care provision
Sound financial planning is vital for ensuring vulnerable older people make the right choices to afford them a financially secure later-life. Many older people, their families, and indeed many IFAs, are unaware of the solutions available for coping with different circumstances that arise in later-life, including the payment of care home fees.
Clara Sykes entered into care in January 2009, several months after a road accident severely impaired her mobility. Ninety-six years old, Clara had lived independently for nearly 30 years, often walking the three miles to the supermarket, carrying her shopping bags back herself.
This all changed when Clara was hit by a car. She suffered serious injuries which markedly affected her mobility. Clara began to suffer from falls in her home and became increasingly dependent upon her daughter who became responsible for her nursing, shopping, bill paying and gardening. By December 2008, her physical condition had deteriorated so significantly that she was hospitalised and soon after was advised to move into a nursing home.
Having built a career in financial services, Kenneth understood the importance of ensuring his mother’s stay in a nursing home was financially sustainable. Kenneth heard about Partnership Assurance through an IFA who offered him specialist guidance on obtaining and paying for long term care. After considering the various options, he decided that an Immediate Care Plan would be most appropriate for his mother’s needs as it provided a guaranteed level of income and therefore peace of mind.
An Immediate Care Plan is a type of annuity that is used to pay for care in later life. As with other types of annuities, a capital amount is invested in exchange for a monthly income that will continue for as long as the person lives, regardless of how long this is. The income is paid direct to the care provider, meaning it is exempt from taxes.*
Given the importance Clara placed on savings, Kenneth was able to use some of the money his mother had put away to purchase Partnership’s Immediate Care Plan. Kenneth bought his mother’s Plan for £73,000 and it pays out £1,600 each month. The fees at his mother’s care home are just under £2,000 a month. The difference each month is made up with her pension and Attendance Allowance.
Partnership’s Immediate Care Plan is tailored to each individual’s circumstances. With care fees rising on average around 5% each year, Kenneth was able to offset this risk by choosing a plan for his mother where the payments increase by 5% a year. Partnership also offers plans that protect a percentage of the initial investment made.
Chris Horlick, Partnership’s managing director of care, said “It is vital that people are fully aware of the financial options that are available to them in later life. In England, anyone with assets over £23,000 has to pay for their own stay in a care home. Given that the average cost of residential care is £25,000 - £35,000 per year, depending on the level of care required, the costs can very soon mount up.”
“The result can be the total erosion of an estate with the resident or their family having to fall back on the local authority to fund the care – and there are no guarantees that they will be willing to maintain the same level of payments. Worst-case scenario, the person has to move to a cheaper home – which can obviously be very traumatic.”
He continued, “Kenneth Sykes did the right thing in speaking to an IFA qualified in giving long term care advice. However, despite the fact that a third of new care home residents privately fund their care, research shows that only 17% receive advice from a suitably qualified IFA.”
“Advisers have an invaluable role to play in shattering preconceived ideas that the only option available to fund care is by using up an individual’s estate and spreading the word that there are funding options available that can guarantee income, provide peace of mind, and prevent total erosion of an estate.”
For more information on getting into the long term care market visit
*The rules governing taxation are subject to review and change in the future and depend on individual circumstances.
The above is based on an actual case submitted to Partnership.
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