immediate needs annuity

March 2024

Immediate Needs Annuity – How to get an immediate care annuity to meet your care costs in March 2024

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 buying a pension annuity as part of 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 are also a type of long term care insurance in that it provides an income towards meeting the costs of your care and is increasingly a popular option when looking at paying for 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 or more.

Topics that you will find covered on this page

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 the basic information you’ll need, including:

– what types of immediate needs annuities are available

– the advantages and disadvantages 

– who is eligible for an immediate care annuity UK

– how to find a professional financial specialist to help you make the right decision and avoid overspending by thousands of pounds

What is a Long Term Care Annuity or an Annuity For Care Home Fees?

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 an annuity for care home fees. It is especially useful for those that may have a shorter life expectancy.

This type of annuity, 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 long term care annuity providers.

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 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.

Consult with a financial professional to find more information about current immediate annuity rates.

Here is a short video that sets out how a care annuity works.

What does an immediate need care fee annuity involve?

There are a few steps to getting an immediate need care fee annuity. First, 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.

What are the different types of Long Term Care Annuity?

There are two main types that you should consider:

  • An Immediate Needs Annuity, which is suitable for individuals who are already in care or will imminently be moving into a residential home.
  • Deferred Care Annuity is the best option for those who are reviewing their care funding provision ahead of time.

Case Study – Funding Mrs Jones Care

Mrs Marshall’s daughter and POA Rebecca wanted advice on how she could fund her mother’s residential care fees as her mum Evelyn aged 85 could no longer safely look after herself and she was suffering from mild dementia and had recently moved into a lovely care home and had settled very well.

Her care fees were currently £1,050 per week and she was only receiving £ 473 p.w. from pensions and Attendance Allowance, and Evelyn wasn’t entitled to any free NHS Continuing Healthcare nor Local Authority assistance, as Rebecca had recently sold her mother’s house and so had savings of £335,000

Writing out cheques of £4,550 per month, Rebecca was becoming increasingly concerned about how quickly her mother’s savings were eroding and wanted to secure her care and if possible, protect some of her mother’s savings for her and her siblings as this was something Evelyn had always intended.

Rebecca had heard about care fee annuities from her mother’s care home but knew very little about them so contacted specialist care fee advisers Care Fees Annuity to find out more.

Solution

After hearing about how a care fees annuity would provide a tax-free income for the remainder of her mother’s life no matter how long she lives, would help cap the cost of care and therefore, help preserve any remaining money for beneficiaries and would only need to provide the difference in the cost of care -£30,000 p.a. rather than the full cost, Rebecca asked us to get some quotes.

As each annuity is individually priced based on the person’s own medical records and need for care and can vary considerably between long-term care annuity providers, we obtained quotes from all providers and after a few week’s delay whilst medical records were obtained, we were able to report that Rebecca could obtain a 5% escalating annuity providing initially £30,000 for just one single premium of £154,620.

As this would help preserve £180, 380 of mum’s savings and ensure her mum could continue receiving the care she was getting after discussing it with her siblings Rebecca asked us to set it up.

Mrs Marshall is a fictional case, and all premiums and fees are for illustration purposes.  If you are acting for someone and would like to discover just how much a care fees annuity might cost, Care Fees Annuity.co.uk would be pleased to provide you with your very own quotes from all available insurers -FREE OF CHARGE.

Request a quoteof 

Would you like to see how much a Care Annuity would cost you?

Click the button below to get a free personalised quote from

Care-Fees-Annuity.co.uk

Care-Fees-Annuity is a trading name of Keith Hargraves, an appointed representative of 2plan wealth management Ltd. Keith Hargraves is authorised and regulated by the Financial Conduct Authority and is entered on the FCA register (www.fca.org.uk) under reference 534065. If you take out a product via Care-Fees-Annuity, we will receive a fee for introducing you to them. Care-Fees-Annuity provides initial quotes free of charge and without obligation. By contacting Care-Fees-Annuity through us, the cost of any product would be the same as if you had contacted them directly. The fee we received is used to help keep our site operational and to produce new content. 

Immediate needs annuity UK rates – What will a £20,000 benefit cost

The answer to the question “how much does an annuity cost?” will depend on the current 
immediate needs annuity rates.  The current immediate annuity rates are made up of many factors, including your age, health as well as the cost of care.

It is impossible, therefore, to get an instant annuity rate quote as 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 £20,000 per annum.  Here is an immediate annuity tables:

AgeNon-increasing annuityAnnuity escalating by 5%
75£115,125£137,335
80£111,173£130,512
85£92,922£105,628
90£81,262£89,890
95£63,960£69,065
100£60,249£64,570

Please note these figures are as at October 2022.

What is an immediate care annuity calculator?

A good tool for estimating potential income from an emergency needs annuity or care home annuity is an immediate care annuity calculator or care home annuity calculator.

These calculators consider the user’s age, gender, health, and the amount they are willing to put in the annuity, among other things.

Individuals can get an immediate needs care annuity quote by entering this information, which gives an estimate of the income they might get on a regular basis to cover their long-term care costs.

Some reputable annuity providers provide their own instant annuity calculator, such as the Aviva annuity calculator, which focuses especially on urgent care annuities and aids people in making decisions about their long-term care planning.

As it enables people to evaluate numerous scenarios and comprehend the potential financial repercussions of alternative options, using a care home annuity calculator can be a useful step in the financial planning process.

By obtaining an immediate needs annuity quote through a care annuity calculator, individuals can better understand how an immediate care annuity can fit into their overall financial strategy and help them meet their long-term care needs.

immediate care annuity

Immediate needs annuity providers

Unlike conventional annuity providers, the market for immediate needs annuity providers is much smaller.   

When selecting an immediate care annuity providers, it’s important to consider factors such as the company’s reputation, financial stability, and the specific features and benefits of their annuity products. Reputable suppliers frequently have a history of providing policyholders with dependable and effective services. 

In order to guarantee the provider’s long-term ability to honour claims and deliver the promised benefits, financial stability is also essential. 

To make a decision that is appropriate for your unique situation and aspirations, it is also crucial to comprehend the annuity’s terms and conditions, including coverage limits, elimination periods, and any optional riders or bonuses. 

People can have peace of mind knowing they have taken precautions to protect their financial security in the event of anticipated long-term care costs by working with a reputable long-term care annuity provider.

How to pay for an annuity

One of the most popular ways to fund an annuity is by 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.

 

care annuity

Who a care annuity may be suitable for

1 – Already in a care home or care environment

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

2- Peace of mind

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.

3- Cap the cost of care 

Care Fees Annuities also enable 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.

4 -Flexible

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.

5 – You have the money to pay for it

Annuities can be expensive, so if you can afford it, it will help you know that these costs have been provided for.

What are the risks with a Care Annuity and who may they be unsuitable for

There are, however, some important risks to think about when considering a Care Fees Annuity.

1 – The decision cant be reversed 

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.

2 – Doesn’t guarantee care costs are covered

It’s also possible that your care may not be fully covered – and many annuities don’t fully guarantee that the ongoing 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.

3 – Impact on means-tested benefits and tax credits

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.

4 – Potentially expensive annuity rates are not in your favour

Annuities can often be seen as expensive, so you need to consider whether this is the best way to spend what may be a large cash lump sum.

5 – You may not need to pay for care immediately

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

6. You may not need care on a permanent basis

You may have an alternative provision in place for long 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. Another option might be to take out a short term annuity. 

Unlike long term care annuity products, a short term care annuity is a kind of insurance product that offers people a set income stream for a constrained period of time to meet their short-term care requirements. This annuity is especially made to take care of short-term or urgent medical needs, which typically last from a few months to a few years. 

For people who need financial support with their care costs during a transitional phase or while recuperating from an illness or injury, short-term care annuities are an option.

7 – You are eligible for NHS Continuing Care funding

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 into an irreversible annuity contract.

Who is eligible for a Care Annuity?

Immediate Needs Annuities are 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 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 providerEach plan is individually underwritten for an individual’s personal needs using the 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 policyholder if preferred – for example, if they are receiving care at home from non-registered care providers, they may prefer to receive the funds directly.

However, the downside 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 increases 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, iis 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 prices 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.

immediate needs annuity calculator

Buying a care annuity – What do I do next?

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 annuity 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 for 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.

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 free personalised quote from

Care-Fees-Annuity.co.uk

Care-Fees-Annuity is a trading name of Keith Hargraves, an appointed representative of 2plan wealth management Ltd. Keith Hargraves is authorised and regulated by the Financial Conduct Authority and is entered on the FCA register (www.fca.org.uk) under reference 534065. If you take out a product via Care-Fees-Annuity, we will receive a fee for introducing you to them. Care-Fees-Annuity provides initial quotes free of charge and without obligation. By contacting Care-Fees-Annuity through us, the cost of any product would be the same as if you had contacted them directly. The fee we received is used to help keep our site operational and to produce new content. 

What should I do next?

If you are thinking about taking out an Annuity, you should first explore other options open to you to ensure that this is the most suitable.

When considering various ways to fund an annuity for care home fees, 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 advise 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 early death, can 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.

Financial promotion

Please note that UK Care Guide has no link or connection with 2plan. 2plan wealth management Ltd is authorised and regulated by the Financial Conduct Authority. It is entered on the Financial Services Register (www.fca.org.uk) under reference 461598. They have, however, approved the links on this page to Care-Fees-Annuity.co.uk who can obtain immediate annuity quotes for you.
 
Care-Fees-Annuity is a trading name of Keith Hargraves, an appointed representative of 2plan wealth management Ltd.  Keith Hargraves is authorised and regulated by the Financial Conduct Authority and is entered on the FCA register (www.fca.org.uk) under reference 534065. If you take out a product via Care-Fees-Annuity, we will receive a fee for introducing you to them. Care-Fees-Annuity provides initial quotes free of charge and without obligation. By contacting Care-Fees-Annuity through us, the cost of any product would be the same as if you had contacted them directly. The fee we received is used to help keep our site operational and to produce new content.  

Meet the author

Jane Parkinson

Jane Parkinson

Jane is one of our primary content writers and specialises in elder care. She has a degree in English language and literature from Manchester University and has been writing and reviewing products for a number of years.

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Frequently Asked Questions

What is a Long Term Care Annuity or an Annuity For Care Home Fees?

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 an annuity for care home fees. 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.

What does an immediate care annuity involve?

If you get an annuity with long term care, there are a few things involved. 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.

What are the different types of Long Term Care Annuity?

There are two main types of long term care annuities that you should consider:

  • An Immediate Needs Annuity, which is suitable for individuals who are already in care or will imminently be moving into a residential home.
  • A Deferred Care Annuity is the best option for those who are reviewing their care funding provision ahead of time.

What is a deferred care annuity?

A deferred care annuity is an insurance product that provides individuals with a future stream of income specifically designated to cover long-term care expenses.

Deferred care annuities feature a waiting period before the income payments start, in contrast to immediate care annuities, which begin delivering money right away.

People pay premiums into the annuity during this deferral period, which builds up and increases over time. At a predetermined time, usually when the policyholder reaches a specific age or needs long-term care, the annuity enters a payout phase.

Deferred care annuities allow people to plan ahead for prospective long-term care requirements while possibly reaping enhanced income accumulation throughout the deferral period.   

How much will an annuity pay per month?

The original investment amount, the kind of annuity, the age of the annuitant, the length of the payout period, and any additional features or options selected all affect how much an annuity will pay each month.

Annuities can be made to offer a fixed monthly payment, a variable payout dependent on the performance of the market, or a payment that is inflation-indexed.

It is advised to speak with an annuity provider or financial advisor who can evaluate your situation and provide customised calculations based on the selected annuity product to calculate the precise monthly payment amount.

How to pay for a care annuity

One of the most popular ways to fund an annuity is by 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.

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Care-Fees-Annuity is a trading name of Keith Hargraves, an appointed representative of 2plan wealth management Ltd. Keith Hargraves is authorised and regulated by the Financial Conduct Authority and is entered on the FCA register (www.fca.org.uk) under reference 534065. If you take out a product with Care-Fees-Annuity, we will receive a fee for introducing you to them

Annuity premiums are individual and priced on your own medical history.  

 

That’s why we work with Care Fees Annuity, so you can get a personalised FREE quote.

 

This is a specialist area where professional support can be very helpful.  

Care-Fees-Annuity is a trading name of Keith Hargraves, an appointed representative of 2plan wealth management Ltd. Keith Hargraves is authorised and regulated by the Financial Conduct Authority and is entered on the FCA register (www.fca.org.uk) under reference 534065. If you take out a product via Care-Fees-Annuity, we will receive a fee for introducing you to them. Care-Fees-Annuity provides initial quotes free of charge and without obligation. By contacting Care-Fees-Annuity through us, the cost of any product would be the same as if you had contacted them directly. The fee we received is used to help keep our site operational and to produce new content.  

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