National Friendly explains the importance of discussing later-life care, and how later-life care annuity works.
Of all the financial planning we can do perhaps the least talked about or considered with any relish is the placement of an individual or loved one into full-time care.
This is likely because people don’t want to think of themselves as vulnerable and reliant upon others at later life stages. Younger generations also struggle to imagine their loved ones in such situations.
So, if no one wants to talk about it, how do nearly half a million people find themselves in care homes? Who makes the arrangements and who pays for it all?
‘Why does this impact on me? Well, you may have to make the decision yourself one day, and, if you’re an adviser, you will certainly have clients who will be faced with that dilemma.
It’s always good to be in the know, and there are some great information resources available that can help you find and choose care homes*.
Why do we need a later-life care annuity?
Too many people end up having the house they treasured and worked hard for, sold to pay for care. The inheritance they planned for their family is then drawn down on for an indefinite period. It’s not unusual for care home fees with nursing to exceed £50,000 a year, and a long spell in care can use up considerable funds.
How does it work?
A care annuity is a way of providing at least some certainty on the ultimate cost of care. Like all annuities it involves the investment of a lump sum. The size of the lump sum will be determined by the medical underwriting of the person going into care.
How do you set up a later life care annuity?
The only way this product can be purchased is through specially qualified Independent Financial Advisers (IFAs**), who have the relevant experience and training to present such an annuity as one of the options available to their client.
Conversations will often be with the extended family, and it’s not unusual for an adviser to be speaking to a relative holding Power of Attorney for the care recipient. If there’s agreement an annuity is right for their circumstances, the adviser will liaise with them to provide medical and other details on a single questionnaire involving a medical company called Medicals Direct Group (MDG).
MDG then send details to four providers – Just, Legal & General, Aviva and National Friendly.
Those four then assess the size of the lump sum, and the adviser will put business with the most appropriate provider for the client, based on price and the policy options selected.
The process can be a long one, as committing a large sum of money is a serious decision.
The selected provider undertakes to make payment of an agreed sum each month to the care provider for the remainder of the policyholder’s life.
There are options to protect this capital against early death, to have payments which escalate to help offset inflation, and/or to defer the payments to the care provider, thus reducing the size of the lump sum required.
Knowing all this can help clients in areas in which you may not be well-versed. Sharing this knowledge with clients and communicating with the industry about what is available is vital to the financial wellbeing of people.
To learn more about later life care annuities, or if you are qualified to advise them, to set up terms of business, visit https://nationalfriendly.co.uk/later-life-care/ or call us on 0330 221 1172.
*You can find useful advice on care at https://www.ageuk.org.uk/globalassets/age-uk/documents/information-guides/ageukig06_care_homes_inf.pdf ** You can find suitably-qualified advisers at https://societyoflaterlifeadvisers.co.uk/
Suitably-qualified means usually a minimum of CII CF8 (Long Term Insurance)