Please note: this article was not written by a financial or legal specialist, and does not cover every circumstance. Please consult a specialist before making any financial or legal decisions – read more here about the process and benefits of consulting a care fees adviser.
There are a range of financial products available to help you provide funding for long-term care in your old age.
Immediate needs annuities
Buying an immediate needs annuity means that you invest money now in order to pay a regular tax-free income to your regulated care provider in order to cover the cost of your care, for as long as care is needed.
The main benefit of an immediate care annuity is that you know the cost of your care will be covered for as long as you need it – however long that is.
To buy an immediate needs annuity you make a one-time lump-sum contribution This is converted into an ongoing, guaranteed stream of income for a specified period of time or for a lifetime.
You can then use the income to directly pay your care home fees.
Read more about using an immediate needs annuity to pay for the cost of your care.
Questions about funding care?
Call us for your free consultation with one of our friendly UK care experts. If you need further support, our Care Concierge service is on hand to provide guidance on typical care costs, help you explore your funding and benefit options, or even negotiate care fees on your behalf.
Find out how Care Concierge can help you
Deferred annuity
A deferred annuity means that you pay a one-off lump sum and the annuity will pay you a guaranteed income in order for you to pay residential care home fees or care at home costs.
Buying a deferred annuity means that you invest money now in order to pay a regular tax-free income to your regulated care provider in order to cover the cost of your care, for as long as care is needed.
You pay your care fees up until the deferment period ends and then your annuity is converted into an ongoing, guaranteed stream of income for a specified period of time or for a lifetime.
Unlike an immediate needs annuity, you can set a deferred annuity to begin at a specified point in the future within the next five years.
Read more about financing the cost of care using deferred annuities.
Long-term care bonds
A care bond is an investment bond where the returns are designed to cover the costs of care in old age.
With care bonds you invest a one-off lump sum in a variety of available funds. The aim is that through this investment of funds you experience capital bond growth, up until you decide to withdraw money from the policy or until your death occurs.
Although money made through investment bonds is taxable, you can usually withdraw up to 5% of the original investment amount each year without any immediate Income Tax liability. This can be drawn monthly to provide a regular income, which can then be put towards the cost of your care.
Find out more about care bonds here.
Long-term care insurance
Pre-funded long-term care insurance provides a regular income which can be used to pay care home fees or the cost of care within a person’s own home.
Traditional long-term care insurance policies are no longer sold, due to the escalating cost of care and growth of life expectancies in the UK.
However, some companies do now offer some limited cover as an additional benefit to a more traditional critical illness policy or a specific limited benefit, such as Assisted Living Insurance which provides a specified “pot of money” (either £20,000 or £30,000) to the insured if they lose mental capacity or fail two or more activities of daily living.
We’ve got more information about your options when it comes to care insurance here.
Saving to pay for care
If you are able to save your own money to pay for care, this can be preferable to having to purchase financial products to cover this cost.
You have the option to use your savings until your total assets fall beneath the threshold for receiving care funding from your local authority. However, remember that your local authority will have limits on the care fees it will pay, and if your care is more expensive than this it may mean topping up or changing to a more affordable care option (which could mean changing care homes).
You might wish to investigate saving for care using a savings account, ISA, defined contribution pension or a trust. Find out more about your options here.
Questions about funding care?
Call us for your free consultation with one of our friendly UK care experts. If you need further support, our Care Concierge service is on hand to provide guidance on typical care costs, help you explore your funding and benefit options, or even negotiate care fees on your behalf.
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