Few people have an endless supply of capital and assets to use to help fund their long term care. That being said, one of the biggest challenges facing those who have to pay for their own care is that their funds can run out, and they can actually run out quite quickly. This is because the cost of providing care is much higher than most people assume. Taking into account the potential cost of providing care in the UK stands at an average of £25,000 for a residential care home and £35,000 for a nursing home it is easy to see how quickly your assets can be depleted. Even someone who appears to have a substantial amount of capital can quite easily be left with very little by the end of their lives. Worse, they can be left with nothing long before they pass away. And very few people want to waste whatever money they do have lost on their own care. Many want to leave something behind to their beneficiaries. However, if self-funding, that can be quite difficult to do.

Once settled into a home many people would not like to find themselves in a position where they need to move into a Local Authority funded care home in their later years because their ability to pay has run out. Although some elderly people may not live long in care there are others who do experience in increase in health status. Those who do improve typically do so because they have been surrounded by company and are enjoying regular meals while also receiving the prescribed medication they need when they need it and in the right amount. Because care homes control all of these factors for their residents, some patients do in fact see an improvement in their health status. However, this does little good for those who have gone through all of their life savings just in order to pay for that care.

A care plan or immediate needs annuity would provide an income for the rest of your life in return for the payment of a once time lump sum. In exchange for one large payment, the annuitant receives periodic payments to help cover the costs associated with on-going and long lasting care. The actual amount of that lump sum would be determined by taking into account a number of factors including the level of income that is required, the age of the annuitant, the health status of the annuitant as well as their medical history and potential life expectancy. Because each case is underwritten on an individual basis the rates available on this type of annuity are likely to be considerably higher than the rates available on a standard purchased life annuity. This is especially true if the health status and medical history of the annuitant are especially poor. It also depends highly on how much care is estimated to cost. For those who need additional services, the amount of the periodic payments will need to be higher than someone who needs only basic care. However, the major benefit to this type of scheme is that income from the annuity would be paid without taxation, provided it is paid directly to the registered care provider. This means that the overall cost may be slightly lower as there isn’t any tax involved. Again, investing in this plan to pay for care is an independent and individual decision and would rely quite heavily on the individual status of the participant. For some, this is a great opportunity to pay for necessary care without being taxed. For others, this might not be the ideal solution if health and medical history are especially bad. The cost of an immediate needs annuity can change quite substantially from person to person as each variable is unique to the annuitant.

It is therefore important to seek financial advice early in the process to try and protect your assets as much as possible when trying to determine the best individual way to pay for long term care. As soon as it is known that care may be needed in the future, it is important to get financial matters in order. Not every solution works for each individual situation. Each individual has different needs and a different history. That being said, it is important to ensure that you can provide the income needed to cover your long term care costs for the rest of your lifetime. That entails determining how much money you will need to supply the care as well as determining the best way to pay for it.