Long Term Care Plans - A Deep Dive

One of the potential, and sadly often over-looked, routes to care funding is the Immediate Care Plan (sometimes called a care annuity). Something of a secret it seems to the general public (and even more worryingly, amongst some care admission teams and families entering into care). This is a secret that more families entering care really need to know more about.

What Exactly Is An Immediate Care Plan?

An Immediate Care Plan (ICP) provides a guaranteed, secure income for the rest of your life to specifically pay for long-term care costs. As long as the income is paid to a CQC registered care provider or care home then the income is paid tax free – a significant financial benefit. The ICP requires an upfront lump sum investment with the average in the UK being £160,000.

Each ICP is bespoke and individual to each applicant with ICP providers appraising the individual’s medical history and current health status via GP and Care Home reports and other relevant data.

 An ICP can only be recommended by a niche set of specialist qualified financial advisers and this is part of the reason why this valuable product is often overlooked by families entering the care journey. For anyone looking into advice we would strongly recommend seeking out a SOLLA-Accredited (Society of Later Life Advisers) Independent Financial Adviser – the gold-standard in later life advice.

When Is An Immediate Care Plan Appropriate?

By far and away the most importance benefit of an ICP is that if offers both the person entering care and the family significant peace of mind.

Research has shown that one in four people are forced to sell their home to pay for care and one in six use up their entire life savings paying for care. If you run out of money, you fall under the care of the Local Authority and run the risk of being forced to move to a more ‘cost effective’ care setting.

Therefore the ICP is really there mainly to protect you and the family from longevity risk; the danger of running out of money. It not only provides peace of mind for the person in care that they will not have to be moved in the future, but also it ring-fences the assets that are not used when investing in an ICP – potentially to be used for the family inheritance or an emergency fund if the situation changes. Its also a great Inheritance Tax (IHT) planning product – as the lump sum used to invest in the ICP is immediately deductible for IHT.

From a practical point of view, ICPs are only available to ‘self-funders’ - those who are required to pay for their own care because they have significant assets. ICPs are usually taken out on a shortfall basis where the person does not have enough income to meet the care expenses but has significant wealth in the form of cash, investments or perhaps a property sale. The average lump sum required for an ICP in the UK is £160,000 but quotes are provided on an individual basis – sometimes higher lump sums are required depending upon age and health status.

The Features of an Immediate Care Plan

ICPs offer a guaranteed and low risk form of care funding solution. However at your first financial advice meeting, your specialist later life adviser will potentially recommend different options and guarantees that some or all of the ICP providers offer. Some, none or all may be appropriate, depending upon your own specific circumstances and what is important to you and the family. These will be discussed and agreed upon with your specialist later life adviser. The following options give you an idea but are not exhaustive.

For instance, escalation options allow for the ICP income steam to increase with predicted care fee increases or increase by a certain amount each year or are simply linked to inflation. This is an important consideration as with care costs rising on average 6-8% per year, it is very easy for an income short-fall to start to emerge over the years in care.

Each provider has various capital protection options available, some providing an automatic return of some or all of the capital if death was to occur within 6 months of outset. It’s also possible, for an increased upfront premium, to protect a longer term minimum return for the ICP. Again, your adviser will be able to recommend suitable options depending upon your situation and what is important to you.

A deferred needs plan is exactly the same as the ICP expect the income is deferred – with the deferral period lasting anywhere between 1 and 5 years. This is a very popular option as it requires a lower upfront premium, can be cheaper in the event of an early death (short-term protection still available with certain providers and cheaper overall if death happens before the income from the plan starts) but also protects against longevity risk. Remember, you will need to fund your own care fees during the deferral period but it often works out cheaper this way. Speak to your adviser for more details.

Free Care Information Events: Reserve Your Place

At Harold Stephens, we’ve helped many families across Bristol navigate the financial side of later life care with calm, clear advice. If you are looking in to paying for care for yourself or for a loved one, we understand it can feel overwhelming, but you don’t have to figure it out on your own. Join us on one of our warm, jargon-free, practical sessions to help you make informed choices about your future, book your place on either:

Tuesday 11th November 3.30pm - 4.30pm, Stoke Lodge, Stoke Bishop

Wednesday 19th November 1.30pm – 2.30pm, Stoke Lodge, Stoke Bishop

You can book directly by phone on 0117 3636212 or email us at office@haroldstephens.co.uk