If income from investments and savings can cover the care fee shortfall, this is usually all well and good. However, most people do not have anywhere close to the level of assets to do this. If investment and savings income was 3% net per annum, it would take £833,33 to pay for £25,000 of care. If it was 5% net per annum, it would take £500,000 to pay for £25,000 of care (ignoring annual increases).
If this level of capital is not available, options include:-
If life expectancy is short, it may be more prudent to gradually deplete assets to pay for care. This can include savings and investments being gradually depleted or the Local Authority Deferred Payments Agreement if capital is tied up in the domestic home and the care recipient lived alone.
If life expectancy is longer, an Immediate Care Plan is often a prudent option. An Immediate Care Plan is a specialised form of annuity, in which a single premium is paid to an annuity provider in return for care fees being paid tax-free for the life of the person in care. In successful cases, Immediate Care Plans can stop the complete or severe depletion of the estate that can occur by paying for years of care fees out of assets. If life expectancy is at least the break-even point for an Immediate Care Plan - the point at which the total of care fees paid by the provider is equivalent to the premium paid to them . an Immediate Care Plan should usually be a strong consideration.
If life expectancy is longer and capital is tied up in property, one ICP provider now accepts the premium via a first charge on the property. See our releasing equity page for more information.
Michael Migan BA (Hons)
Care Funding Manager
Care Fees Advisers