Using savings and investments

On the face of it, using savings and investments to pay for care may seem like a sensible option. Savings and investments may be easier to access compared with other funding options, however there are some drawbacks.

If a client solely uses savings and investments to fund care, the client may not be protected from longevity risk.


An alternative approach

You may wish to consider an immediate needs annuity. In exchange for a single premium, an immediate needs annuity usually pays a monthly payment to your client’s UK registered care provider for the rest of their life:

  • The costs of care are uncertain. A BUPA study found that, while the average stay in a care home is around 2.3 years, nearly one in ten people will still be alive after six years. An immediate needs annuity can provide a degree of certainty over the costs of care.
  • No income tax is payable as long as payments are made directly to a UK registered care provider.

Find out more about our immediate needs annuity, Lifetime Care Plan

Other options include equity release or renting the home.

There are risks to this approach too:

Immediate needs annuities don’t guarantee to cover the entire cost of care and your client's care costs may increase over time. Your client is responsible for funding any shortfall and may need to fund their additional care costs from other sources.

The total amount of monthly payments made, plus any payment made as part of any death benefits, may be less than the original premium paid for the plan.

If your client no longer requires care, or becomes eligible for state funded care, they will not be able to cancel the plan and the income will be paid directly to them, subject to income tax.

Income tax is not usually due on payments made to a UK registered care provider under current laws. The rules governing tax may change in the future.