Long Term Care
Immediate Care Annuity
Ethel (a widow of 86) had a mild heart attack about 6 months ago, has osteoporosis and diet controlled diabetes, she is now quite frail. She had a fall a few months ago, broke her hip and had been in hospital for a couple of weeks. She was assessed there as needing residential care, as she needs help with washing, dressing and mobility and was unable to return home alone.
She has some savings, owns her own home and has low level of income of State pension, Attendance Allowance (applied for at the higher rate i.e. care required day and night) and a small personal pension that was her husband’s originally. All in all, her income is about £910 per month and her assets – mainly her property – are £420,000. As her assets are in excess of £23,250 Ethel will need to fund for her own care.
The cost of the care home that Ethel and her family have selected is £650 per week. She has a lovely room there with a view of the garden and she enjoys the social activities they put on, which she was missing in her own home. She has also gained in confidence since moving into the care home, previously she was frightened of being alone and was becoming more and more frail.
The family have taken financial advice from OCM Wealth Management Ltd and have looked at all the options available. They have decided to fund Ethel’s monthly shortfall in income of £1907 by purchasing an annuity on the sale of her property.
To meet her current income shortfall, she could purchase an immediate care needs annuity, which is based on her individual state of health. This would give her an income for lifetime, commencing at £1907 per month and increasing by 5% per annum to go some way towards increasing care fees.
This route gives Ethel peace of mind that she will be able to afford the care long-term and also means she will be able to leave some funds to her family, should she be very long lived. If Ethel did not have an annuity in place her savings could be depleted and potentially the local authority could move her to a cheaper care home, if they were asked to assist with funding.
In the very short term, up to six months, there is an element of capital protection should she unfortunately die, so there would be some return of the premium to her estate. As the annuity is paid direct to the care provider, it is not taxable on Ethel.
Additionally, this caps Ethel’s outgoings to a large extent, meaning the excess can be left as an inheritance for her family or can be accessed should she need additional income to meet increases in fees, or for nursing care.