The vast majority of people who have to meet their own care costs are unlikely to be able to do this without using up at least some of their assets.
The most common approach for funding any ‘shortfall’ between existing income and care costs tends to be to simply draw down what is needed each month from savings, and perhaps property sale proceeds, and hope that these do not run out completely.
Some will seek advice as to how best to make those assets work for them to generate a good income and to last as long as possible. The advice that tends to be given, however, is based around investment solutions which will differ according to your ‘attitude to risk’. Unless you have a very significant amount of capital (relative to the income you need) or you take a very high risk investment strategy that happens to pay off, capital depletion will be unavoidable – the level of depletion depending on how long you live in care for. This may be a perfectly acceptable solution but it does not always offer the peace of mind that many are looking for, especially as there is no guarantee of an inheritance being left for the family.
There is, however, an alternative to meeting care costs from capital on an open-ended basis, although you will not be alone if you do not know about it! Many financial advisers, solicitors and even staff within Care Homes haven’t heard about it either.
The alternative is to purchase an immediate or deferred care fees annuity which will pay out a guaranteed, tax-free income for life. This is not the same as a pension annuity which would offer a much lower and taxable income and does not take into account the age and state of health of the individual.
At Eldercare we believe that making such an important decision as how best to pay for care should only be made once you are in possession of all the facts. This is especially important if you are making decisions under a Power of Attorney as it is your duty to act in the other person’s best interests. This should include understanding and assessing all funding options, one of which may be the purchase of a care fees annuity. In fact it is our strong belief that you should rule the annuity in or out as an option before looking at investment alternatives and we are here to help you do just that. The very first stage of our Care Journey will assess the likelihood of the annuity being an appropriate solution for your needs – and if it isn’t, we will tell you!