Using immediate needs annuities
One of the biggest challenges of funding for care is uncertainty around how long someone will live for and whether they go into a care home or require care in their own home. We also acknowledge that care fees can be very costly. So what does this mean in terms of risk?
If you underestimate how long someone will live, they could run out of money and be left without the care they want and need.
It’s impossible to know how long someone may live in a care home but there are statistics on life expectancy and average stays in a care home, which should be considered when putting a financial plan in place.
This creates uncertainty. It's difficult to predict how long someone might spend in a nursing home and the impact of a long stay can be financially devastating.
What is an immediate needs annuity?
An immediate needs annuity can provide a guaranteed monthly payment for life to help pay for your client's care fees.
In exchange for a single premium, an immediate needs annuity pays a monthly payment to the individual's UK registered care provider for the rest of their life. Fees are likely to increase with inflation over time and there are two ways to deal with this.
- Firstly, your client can choose for payments to increase by a fixed percentage or in line with RPI to help mitigate the impact of future price rises.
- Secondly, care increases could be paid for from other assets if available.
Either way, the guaranteed lifetime payment will remove a lot of the financial uncertainty when someone is required to self-fund their care.
Who might an immediate needs annuity be suitable for?
- Anyone looking for peace of mind that some of their care costs will be paid for the rest of their life.
- Someone looking to mitigate the risk of running out of money.
- Someone looking to protect any further assets they may have.