Care Fee Annuities are another option when it comes to privately funding your own home care.

We recommend that you seek independent financial and legal advice before making any decision about care fee annuities.

What is a Care Fee Annuity?

A Care Fee Annuity involves you paying a lump sum of money to buy an insurance policy that provides a regular income including the cost of your care fees for as long as you live

Types of Care Fee Annuity

There are two different types of Care Fee Annuity.

Immediate Needs Annuity – This is where funding begins as soon as possible once you’ve gone through the assessment process. The cost of this plan will depend on factors such as your age, health and expected levels of care now and in the future.

Deferred Annuity – This is where funding begins at a designated time in the future either one, two, three, four or five years. The cost of the plan will be lower the longer you defer the start date. Should you need care before the designated start date, you will need to pay this yourself.

Advantages & Disadvantages of an Immediate Needs Annuity

Below are a few of the advantages and disadvantages of an Immediate Needs Annuity. We are, however, not experts in this area so you should always seek independent financial and legal advice before deciding on this type of funding for your in-home care.

Advantages

• It guarantees to pay an agreed lifetime income to help fund care fees.
• If your plan pays the care provider directly then the payments are tax free. Your Care Provider must be registered with the local regulatory body for this to occur. In England this is the CQC (Care Quality Commission).
• You also have the flexibility to transfer care providers.
• Your plan can be set up to increase each year in line with inflation or at a fixed level.
• If you don’t need care or are eligible for care funding then you will receive your payments as income. However, this is taxable at a marginal rate.
• The cost of this plan is currently deductible from the future estate’s value. This may help with inheritance tax liability.
• You get a 30 day cancellation period.
• It is protected by the FSCS (Financial Service Compensation Scheme)

Disadvantages

• It requires a large upfront payment.
• Because this is underwritten, setting it up is not a quick process. Information will need to be collected from your GP, care provider and family.
• If you haven’t taken out protection and die soon after taking out the plan, your estate won’t receive a refund.
• You can’t change the plan once it’s taken and the 30 day cooling off period has passed.
• If you don’t need care or are eligible for care funding then you will receive your payments as income, which is taxable at a marginal rate.
• Your annuity may not cover care fee increases so you may need to make up any shortfall.

Advantages & Disadvantages of a Deferred Annuity

Below are a few of the advantages and disadvantages of a Deferred Annuity. We are, however, not experts in this area so you should always seek independent financial and legal advice before deciding on this type of funding for your in-home care.

Advantages

• It guarantees to pay an agreed lifetime income to help fund care fees.
• If your plan pays the care provider directly then the payments are tax free. Your Care Provider must be registered with the local regulatory body for this to occur. In England this is the CQC (Care Quality Commission).
• You also have the flexibility to transfer care providers.
• Your plan can be set up to increase each year in line with inflation or at a fixed level.
• If you don’t need care or are eligible for care funding then you will receive your payments as income. However, this is taxable at a marginal rate.
• The cost of this plan is currently deductible from the future estate’s value. This may help with inheritance tax liability.
• You get a 30 day cancellation period.
• It is protected by the FSCS (Financial Service Compensation Scheme)

Disadvantages

• It requires an upfront payment. Although this will be less than the Immediate Needs Annuity.
• You will need to pay for any care fees incurred before the start date of your deferred annuity.
• There is no refund once you’ve taken out the plan and passed the 30 day cancellation period.
• If you die early, and haven’t taken out protection, your estate will not receive a refund.
• If you don’t need care or are eligible for care funding then you will receive your payments as income, which is taxable at a marginal rate.
• Your annuity may not cover care fee increases so you may need to make up any shortfall. 

Further Information

If you would like to know more about Care Fee Annuity plans as funding option then here are a few places to start:

Age UK Advice Line – 0800 678 1602
Independent Age – 0800 319 6789
Money Advice Service – 0800 138 7777