At UK Care Guide we understand that often the financial prospect of care can be daunting and difficult. That’s why we’ve compiled comprehensive articles on each method of paying for care to help you to make a sound decision.
Typically, people associate annuities with retirement planning. However, In this comprehensive article we explore the option of taking out an Immediate Care Annuity to cover the cost of those needing care.
These types of annuities are also sometimes referred to as a care home annuity, as they are often used to pay for long term care, which can also be home care as well as a care home.
Getting this wrong can easily cost YOU £30,000.
That is why we recommend you read this article carefully, as we are pleased to have been able to help our site users avoid making a wrong, and very expensive, decision. A decision that once made can not usually be revoked.
This helpful guide includes all basic information you’ll need including:
– what types of immediate needs annuity are available
– the advantages and disadvantages of a care annuity
– who is eligible for an immediate care annuity
– how to find a professional financial specialist to help you make the right decision and avoid overspending by thousands of pounds
An annuity is simply a term that means an income is paid for the rest of your life.
A ‘Long Term Care Annuity’ is a type of insurance policy which provides a level of income for your lifetime, which you can use to pay for long-term care, and in particular where you use a care home annuity. It is especially useful for those that may have a shorter life expectancy.
Long term care insurance or a long term annuity is a way to use your savings through a third party to pay for your care. This is often an advanced option suitable for those who wish to plan ahead for care provision in the future.
Some people may prefer to take away the worry of paying for their care in the future by buying a guaranteed income for life from an insurance company.
As above, an Immediate Annuity is most suitable for individuals who are considering care provision ahead of time. If you are already accessing care then don’t worry – an Immediate Needs Care Annuity provides a similar financial benefit for those who are currently in residential care.
One essential benefit of these types of annuities is that they are paid tax-free if the money is paid directly to the care provider.
Firstly, you will agree with an insurance company to give them a lump sum amount. In return they will give you a monthly payment for the rest of your life. This is where the term ‘Long Term Care Annuity’ is derived from. The income is paid tax-free if the payment is made directly to your care provider.
The amount you receive can be fixed, or it can go up each year to cover any increasing care costs.
How much you will receive from your an Annuity depends on a number of factors including your age, your health and how much you have to pay towards the annuity.
There are two main types that you should consider:
It is impossible therefore to get any instant annuity rate quotes, and to get quotes you will need to provide some medical information.
However, to make it as easy as possible for you to obtain ALL possible care fee annuity quotes we have partnered with specialists care fee annuity brokers Care-Fee-Annuity.co.uk who have agreed to obtain ALL possible annuity quotes FREE of CHARGE.
To give you a guide, we have provided an example below of what you need to pay as a lump sum to get an income of £10,000, which then increases in the future. These figures were based on immediate needs annuity rates in February 2019.
Your current age How much a £10,000 annuity would cost you
For example, this could mean if you had £100,000 to pay towards an annuity, using a Long Term Care Insurance Annuity provider with poor rates could mean you have thrown away in the region of £30,000.
Simply click below, provide your details and you will receive a simple medical questionnaire for completing and returning.
Would you like to see how much a Care Annuity would cost you?
Click the button below to get a personalised quote from
One of the most popular ways to fund an annuity is through releasing equity from your home. This allows you to take a lump sum, tax free from your home. It basically takes the pressure away from you running out of money as you grow older and allows you to stay in your own home!
Here is a short video that explains how equity release works.
You can read more about how equity release works here.
There are some advantages and disadvantages associated with these types of products. We have set these out below.
They are suitable for anyone that is already in a care environment, such as a care home. The annuity payment is tax-free if it is made directly to the care provider
The main benefit of a Care Fees Annuity or Immediate Need Care Fee annuity is that both can provide you with peace of mind, knowing that you can expect an income to cover care costs for the rest of your life. When the money is paid directly to your care provider it is tax free – therefore saving some valuable funds.
Care Fees Annuities also enables you to effectively cap the cost of your care – as you only provide a set lump sum. This means that you can leave some as inheritance provided you don’t need to dip into it during your time in residential care.
A Care Fees Annuity is suitable for both home care and residential or nursing care provision.
They are fairly flexible – and can be transferred or used for care at home or a less expensive care home. This means in most cases you’ll never be downgraded or unable to afford your home. When your care provider changes, your annuity changes with them.
Annuities can be expensive, so if you can afford it, it will help you know that these costs have been provided for.
There are however some important risks to think about when considering a Care Fees Annuity.
Once you hand over your lump sum to the insurer, it is their money.
It cannot be reversed or refunded. If you were unfortunately to die earlier than you may have expected, your money would not be returned, unless you specifically bought some protection against this at the time.
It’s also possible that your care may not be fully covered – and many annuities don’t fully guarantee that the on going cost of your care will be covered indefinitely.
This depends on your health condition over the years, inflation and the cost of care provision. In this instance you’d be liable for the extra cost, and would need to then top up or provide funds to plug the difference.
You should also note that the income payments from the plan may affect your entitlement to some means-tested state benefits. They can also impact tax credits so this is something you should check.
Annuities can often be seen as expensive, so you need to consider whether this is best way to spend what may be a large cash lump sum.
If you don’t need to pay for your care straight away, they may not be suitable, particularly as to receive the money tax-free you need to pay it directly to a care provider
You may have alternative provision in place for longer term care so if you only need to cover the costs of care in the short term, then an annuity may not always be the best option.
The NHS may be responsible for paying for your care costs. This is known as NHS Continued Care Funding and is a very complicated area. However, it is something you should look at and check your eligibility before you enter in to an irreversible annuity contract.
An Immediate Needs Annuity is required when a person has gone into care already and requires care provision immediately. Therefore, they are often suitable for those with a shorter life expectancy.
Normally this is in residential care circumstances. An Immediate Needs Annuity is an insurance policy that works in the same way as annuities in retirement.
The person pays a set premium for a policy that will pay a regular income towards their care costs for the rest of their lives.
Anyone over the age of sixty is eligible for an Immediate Needs Annuity if they need to be cared for either in a registered care home or by a non-registered care provider in their own home.
The level of the premium depends on a person’s age, health and their choice of care home or care provider. Each plan is individually underwritten for an individual’s personal needs using information provided by their GP. This means that applicants do not have to undergo a medical examination.
The benefits generated from an Immediate Needs Annuity are tax free if they are paid directly to a registered care provider.
They can also be paid directly to the policy holder if preferred – for example, if they are receiving care at home by non-registered care providers, they may prefer to receive the funds directly.
However the down side to this is that the benefits from the Immediate Needs Annuity will be taxed in the same way as a purchased life annuity would be.
Care Annuities are fairly flexible. For example, you can also choose to have the benefits you receive increased every year at a rate offered by the product provider. This is usually in line with inflation.
You can also choose the month in which the rate increases to coincide with the month the care provider increase their fees. In turn this offers you peace of mind and ensures that your fees are fully covered at every step of the way.
Providers regulate care homes and home care agencies, as well as other medical establishments, to ensure they meet current care standards.
As above, it is important to note that if your care costs exceed the income provided by the plan in the future then you will be responsible for the difference. Care Annuity plans, including capital protection, have no cash value at any time and cannot be cancelled or reversed.
One frequently voiced concern is the worry that a person could die soon after taking out the plan. In this instance you can opt to protect some of the purchase price to ward against this in the early years. This is typically known as capital protection.
This however will increase the purchase price – so it’s a risk in itself. The higher the value of the funds you protect, the greater the purchase price will be.
There are a number of steps involved in the process of buying an annuity.
The first stage is to have your plan underwritten. This allows you or your advisor to compare options also and consider options available for both immediate and deferred policies.
If a care funding plan incorporating an annuity is your chosen or recommended solution, it is best to shop around among all available providers in order to find the most cost-effective solution.
Make sure that you fully understand the options available to you when buying an annuity – such as capital protection, a deferred period, escalation and how the plan can help with inheritance tax planning. However if these terms are alien to you, the whole process can feel daunting.
This is why our most crucial piece of advice for those considering any type of care funding, but especially anyone looking into buying an annuity, is to seek independent, professional advice.
Ideally it’s advisable to seek support from an advisor who understands all funding options available to pay care fees. They should also understand how that relates to you and your current needs and future wishes.
It’s a good idea to check credentials and qualifications of advisors before making a choice. A Later Life Accredited Adviser who is a member of SOLLA (Society of Later Life Advisers) is always a safe bet – this is someone who has specific experience and expertise in the care funding field. Therefore, the annuity advisor we have partnered with is SOLLA registered.
They will know how to help anyone considering buying an annuity and offer the best advice in line with their preferences, requirements and financial situation.
How to get a FREE Care Fee Annuity Quote
Simply click below, provide your details and you will receive a simple medical questionnaire for completing and returning. This will then be sent to the insurer and they will be able to give you a quote.
Would you like to see how much a Care Annuity would cost you?
Click the button below to get a personalised quote from
At UK Care Guide, we can help you in one of 2 ways.
It’s important to ensure that you are dealing with someone who understands the market and your requirements fully. An experienced financial advisor will have up-to-date, in-depth knowledge of Annuity providers and will be able to appreciate your personal preferences, putting together a plan in line with your requests.
Option 1 – Search our directory of financial advisors
Option 2 – Get in contact directly with Care-Fees-Annuity.co.uk to get a quote.
Here is a video that explains how annuity works
If you are thinking about taking out an Annuity, you should firstly explore other options open to you to ensure that this is the most suitable.
When considering various ways to fund your care home costs, and in particular buying an annuity, we always recommend that you speak to a specialist financial advisor.
This is an accredited, qualified person who possesses specific experience in assisting individuals needing to fund care. They are completely impartial, so they won’t try to sell you any products from a particular company, and provide guidance with your best interests at heart. They will be able to:
– Advise you on any alternative funding options that may be available
– Review the annuity market and advice you on which provider will give you the most money for your cash sum – rates can differ significantly and change daily!
– Help you tailor an annuity that is right for your circumstances. This would include looking at whether it should increase in payment, can the value be protected on an early death, can a payment be made to a surviving spouse etc.
Care Annuities are complex products – without sound advice, you could make the wrong choice. As Care Annuities are irreversible this could be catastrophic for you and your family