By John T Hughes
More than half (55%) of the 421,000 elderly or physically disabled people who receive long-term care in a nursing home are now self-funders. If the cost of care comes in at around £1,000, where does the money come from?
It's all to easy to sit back and relax thinking that you will qualify for full state funding should you need long-term care, but if you have assets such as property or savings, this is unlikely to be the case. It's also worth remembering that even if you do receive state funding for your care needs this may not necessarily cover all the services you desire.
If you're approaching old age you may be wondering how you would go about funding your own long-term care should the need arise. A common option for funding care needs is through a long-term care annuity (also known as the immediate needs annuity).
long-term care annuities: Key features
Care annuities offer a tax efficient way of paying for long-term care, and a certain amount of protection against premature capital depletion.
In return for a one-off up front premium your annuity provider can pay a fixed tax-free amount towards your care needs directly to the registered care provider of your choice. In many cases this amount will be tax exempt.
Once the care annuity is set up payments will usually carry on until the end of your life, giving you one less thing to worry about. This means that however long you continue to need care, you can rely on a guaranteed payment.
Care annuities are designed for those requiring care immediately whether that be care in their own home or in a nursing home (such annuities are sometimes referred to as care home annuities).
Some of the drawbacks of such an annuity is that an early death could lead to loss of capital, payments may not keep up with the rising costs of care, and that the income generated may affect eligibility for some means tested benefits.
Choosing an annuity
The amount that your care provider receives will depend on a range of factors including the state of your health and your age, as well as the amount that you are able to offer as an upfront premium. It's important to remember that once you purchase your long-term care annuity, as with most other annuities, there is no going back, which means it's important to get the decision right first time. You may want to speak to an independent annuity advisor to find out whether a long-term care annuity is the right option for you or your loved one.
A long-term care annuity can help you to bridge the care funding gap and achieve the level of care that you desire in later years.
John T Hughes writes for Annuites Rates, a site that connects consumers to annuities advice they can trust.
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