The Care Fees Payment Plan
An annuity is an insurance product that is often associated with pensions. It used to be that when you retired you would convert your pension to an annuity. That annuity would guarantee to pay you an income for your lifetime. If you lived a long time, your annuity would be great value; if you died early, you didn't get your money back.
Like all insurance, an annuity works by pooling risk. We have one life and there is a financial risk that it might be long. In the event of longevity our money could run out so by pooling our money with lots of other people, those that live a short time fund those with long lives. Pension annuities have gone out of fashion recently because low interest rates make them very expensive.
A care annuity works on a similar basis but still offers good value because rather than relying on interest rates to set the income or premium level, it is based on an assessment of your health. Because people are buying these later in life and usually in ill health, many care annuities will repay their original premium after between three and six years, but every case is different.
A Care Annuity is also known as a care fees payment plan. In return for a lump sum payment a care fees payment plan or care annuity will pay a monthly tax free benefit direct to your care provider for your lifetime, often set to increase each year with the aim of keeping pace with care fee inflation.
If the premium is affordable, it should mean that you can meet your care fees at your chosen home for your lifetime and any money that remains should broadly be protected.
These are complex products with many options and we would be pleased to discuss how this could work in your situation. Please give us a call or email; as always, our first consultation is without charge or obligation.