As Independent Financial Advisers, we’re able to provide advice on a wide range of financial areas. In this example, we speak with Samantha Paskin-Bywater, who is an Independent Financial Adviser based in our Sheffield office. She tells us about a care fee annuity plan (immediate needs annuity) which she set up for a client 9 years ago, when the client was aged 91. She is now 101 years old.
“My client lives is a care home in South Yorkshire. Her son and his wife were already clients and during our conversations we began speaking about his mother’s care and how expensive it was.
“The mother went into care because she was starting to suffer from dementia, and while she was still quite physically fit, she wasn’t really capable of looking after herself. Because of her dementia, I discussed the situation and gave advice to her son.
“Their main priority was to ensure a high level of ongoing care for the mother. So, the focus was on making her money last for as long as possible, rather taking additional risks and trying to maximise returns. Her main assets were the proceeds from her property sale, which was under £100,000, and this amount was reducing quite quickly because of her ongoing care costs.
“In my conversations with the son, we discussed the possible options and, considering their priority was using the mother’s money to pay for her care fees for as long as possible, and the fact that she was still physically in good health, my recommendation was for her to take out a care fee annuity, which was put in place in August 2014. This is an annuity which is designed for when someone is self-funding their care costs, and it provides a guaranteed income for life. A major benefit of these policies is that the income is paid tax-free, if it’s paid directly to the care provider.
“The mother paid in £95,717 and is currently receiving a monthly payment of just over £2,200. This monthly amount has increased annually with inflation during the period, and the client has received total income of around £200,000.
“The annuity has enabled the mother to live in a high-quality home and to receive fabulous ongoing care, especially as her condition has deteriorated. If she hadn’t bought the annuity, her money could have run out a long time ago and she would have probably needed to move to another care home and be funded by the local authority.
“However, while this is a good news story and the son is very grateful for the advice that I gave, he says that the annuity has been “worth its weight in gold”, there are still ongoing challenges. It’s really important that the cost of care isn’t underestimated, and in this case these costs have been rising by more than the annuity income. This means that the son, who has recently retired, faces some difficult choices about funding any shortfalls.
“The mother is now 101 years old and while her dementia has sadly taken a firm grip, she is physically still quite strong. I am really pleased that the advice I gave has helped her to live her later years in more comfort than what may otherwise have been the case, and that this advice has also been hugely appreciated by her son.”
Content correct at time of writing and is intended for general information only and should not be construed as advice.