Funding Care Options: A Long-Term Care Plan

The costs of making sure someone you love is well cared for in later life can be astronomical, especially if you decide upon one of the best homes in North West Bristol.

These costs can be highly unpredictable as you have no idea how long they will have to be paid. Because of this uncertainty, some families choose to buy a financial product known as a Long-Term Care Plan (sometimes known as an Immediate Needs Annuity). This is a life-long policy which aims to fill the gap between a person's regular income and their care costs.

The money from the policy is paid directly to the care home and is tax free. This is a significant advantage over simply using your loved-one’s assets to buy a regular income (for example via a standard annuity which would be paid subject to income tax).

Long Term Care Plans are considered complex financial products and as such are only available through specialist later life financial advisers who have passed additional later life financial planning qualifications. Ideally the adviser you use should also be independent (An IFA – Independent Financial Adviser) and be an accredited member of SOLLA (Society of Later Life Advisers).  Such an adviser will be able to look at your individual circumstances and recommend whether a Long Term Care Plan would be suitable in your situation. They will also consider whether your loved-one’s assets could be invested in some other way to underpin her potential care costs.

Is It Worth Buying A Long Term Care Plan?

One advantage of products of this sort is that they can be customised to meet your particular needs and also how much risk you are willing to take. One option is to have some sort of guarantee so that in the sad event that your loved one were to die not long after taking out the policy, you would get most of the premium back. In policies of this sort, the value of the guarantee gradually declines the longer the policies pay out. Naturally, you would pay more for a policy with this kind of protection.

Another option is to take out the product now but defer the start of the payouts, usually between a year and five years. The price of this product would, of course, be much lower (because it doesn’t pay out in the deferred period) but you would also have to pay the shortfall on the care fees in those years. This approach reduces the risk that you spend more money on a policy that it turned out you didn't need.

In trying to judge if a policy is good value, a good starting point is being aware of how long, on average, your loved one could be expected to live. The life expectancy tool on the website of the Office for National Statistics is a useful resource for this. Of course, this can only give you average figures and can only ever be a rough guide, but it’s a starting point. In under-writing your plan, the Long-Term Care Plan provider will have asked detailed questions about your loved one’s health including reviewing GP and Care Home health reports and so the quote you receive will be as accurate and individual as can be in estimating life expectancy.

Your SOLLA-Accredited later life financial planning specialist IFA will be able to take you through the options and recommend the option most suitable and best value for your family, given the circumstances and what is important to you.

What Happens If My Loved-One Can No Longer Afford The Care Fees?

If this were to happen, your loved-one would need to apply to the Local Authority for funding. They should be eligible for funding provided remaining savings are below the capital limit of £23,250 assuming they live in Bristol (or elsewhere in England). However, please bear in mind that Local Authorities may only offer funding to cover a place at one of the lower cost providers in the area, and this may not meet the full costs of care where your loved one currently lives.

This might then mean having to move to somewhere where the fees are covered (obviously highly undesirable for a person in later life) or seek a 'third party top-up' from a family member, if that’s financially ‘do-able’ for the family.

Another option might be to see if the existing care home could offer something at a lower cost, perhaps by moving your loved-one to a smaller room. It's worth noting that care homes often charge different rates depending on whether or not someone is self-funding, and if your loved-one became dependent on Local Authority funding it is quite possible there could be some flexibility on fees.

If your loved-one is entering care or has lived in a care home for some time, and long-term affordability is a worry, then definitely get in touch for a financial planning review sooner rather than later. Decisions are best made in advance rather than at the moment of crisis – whether that’s financial or health.

What Else Is There To Consider?

In our experience, most family’s top priority is making sure that their loved-one is secure in their current home for as long as they live and are prepared to accept the fact that a Long-Term Care Plan will involve investing a significant up-front premium to achieve this.

If this is you and you like the idea of the tax efficiency (both income tax and immediately deductible for inheritance tax) and would also like to insure against ‘longevity risk’ (the risk that all of the assets go in care costs), then it seems well worth you exploring this further with a specialist adviser.

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, Shirehampton Road, Stoke Bishop BS9 1BN

Wednesday 19th November 1.30pm – 2.30pm, Stoke Lodge, Shirehampton Road, Stoke Bishop BS9 1BN

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