A Care Annuity is a financial product that gives a known regular guaranteed income for life to help you pay your care fees, in exchange for a capital sum. (It can also be paid tax free if it is paid to a registered care provider)
An Immediate Care Annuity could be suitable for you if:
- You need funding for care to start immediately
- You have access to a lump sum to purchase the Care Annuity
- You want the certainty of payments for the rest of your life
- You need a level or index-linked income to pay care fees
- You understand that if you die early in the plan, you may not get back the full value of your initial investment
How an Immediate Care ANNUITY PLAN works
The Immediate Care Annuity Plan is an annuity which will pay a regular, tax-free income to your registered care provider, in exchange for a lump sum, starting immediately on commencement of the plan. The amount you will receive is agreed at outset and will continue for the rest of your life, regardless of how long that is. It can be increasing and it can have a level of capital guarantee built in too.
It is underwritten on you personally and your health is taken into account. It is unlikely that a medical will be requested as the providers usually just ask for information from your GP and Care Home to assess the premium payable.
If, for whatever reason, you leave care at any point and return home or move to the home of your family, the income will then be paid directly to you, rather than the care provider. In this situation, that income would lose its tax-free status. However, should you later need to return to the care of a registered care provider, that tax-free status would be reinstated.
It will stop on death and if there is no capital protection (or the capital protection has expired) then there will be no money returned to the estate.
The cost depends on the health of the individual but for example, the cost of buying an immediate care needs annuity, for an 84-year-old woman who had had a mild stroke, would be about £105,000. This would pay an annual income of £18,000 index-linked at 5%pa. In this example, the client would have to live for just over five years for the annuity to pay for itself. (source: Partnership 2013. These rates do change from time to time and will depend on your individual health).